Subtitle D—Miscellaneous Excise Taxes
Editorial Notes
Amendments
2022—
2011—
2010—
2004—
1990—
1989—
1988—
1987—
1986—
1984—
1983—
1982—
1980—
1978—
1976—
1974—
1969—
1964—
Statutory Notes and Related Subsidiaries
Imposition of Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers
"(a)
"(1)
"(2)
"(b)
"(1)
"(A) the covered entity's branded prescription drug sales taken into account during the preceding calendar year, bear to
"(B) the aggregate branded prescription drug sales of all covered entities taken into account during such preceding calendar year.
"(2)
| "With respect to a covered entity's aggregate branded prescription drug sales during the calendar year that are: | The percentage of such sales taken into account is: |
|---|---|
| Not more than $5,000,000 | 0 percent |
| More than $5,000,000 but not more than $125,000,000 | 10 percent |
| More than $125,000,000 but not more than $225,000,000 | 40 percent |
| More than $225,000,000 but not more than $400,000,000 | 75 percent |
| More than $400,000,000 | 100 percent. |
"(3)
"(4)
| "Calendar year | Applicable amount |
| 2011 | $2,500,000,000 |
| 2012 | $2,800,000,000 |
| 2013 | $2,800,000,000 |
| 2014 | $3,000,000,000 |
| 2015 | $3,000,000,000 |
| 2016 | $3,000,000,000 |
| 2017 | $4,000,000,000 |
| 2018 | $4,100,000,000 |
| 2019 and thereafter | $2,800,000,000. |
"(c)
"(d)
"(1)
"(2)
"(A)
"(B)
"(3)
"(e)
"(1)
"(2)
"(A)
"(i) any prescription drug the application for which was submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act (
"(ii) any biological product the license for which was submitted under section 351(a) of the Public Health Service Act (
"(B)
"(3)
"(4)
"(A) the Medicare Part D program under part D of title XVIII of the Social Security Act [
"(B) the Medicare Part B program under part B of title XVIII of the Social Security Act [
"(C) the Medicaid program under title XIX of the Social Security Act [
"(D) any program under which branded prescription drugs are procured by the Department of Veterans Affairs,
"(E) any program under which branded prescription drugs are procured by the Department of Defense, or
"(F) the TRICARE retail pharmacy program under
"(f)
"(1) for purposes of subtitle F of the Internal Revenue Code of 1986, shall be treated as excise taxes with respect to which only civil actions for refund under procedures of such subtitle shall apply, and
"(2) for purposes of section 275 of such Code, shall be considered to be a tax described in section 275(a)(6).
"(g)
"(1)
"(A) the per-unit ingredient cost, as reported to the Secretary of Health and Human Services by prescription drug plans and Medicare Advantage prescription drug plans, minus any per-unit rebate, discount, or other price concession provided by the covered entity, as reported to the Secretary of Health and Human Services by the prescription drug plans and Medicare Advantage prescription drug plans, and
"(B) the number of units of the branded prescription drug paid for under the Medicare Part D program.
"(2)
"(A) the per-unit average sales price (as defined in section 1847A(c) of the Social Security Act [
"(B) the number of units of the branded prescription drug paid for under the Medicare Part B program.
The Centers for Medicare and Medicaid Services shall establish a process for determining the units and the allocated price for purposes of this section for those branded prescription drugs that are not separately payable or for which National Drug Codes are not reported.
"(3)
"(A) the per-unit ingredient cost paid to pharmacies by States for the branded prescription drug dispensed to Medicaid beneficiaries, minus any per-unit rebate paid by the covered entity under section 1927 of the Social Security Act [
"(B) the number of units of the branded prescription drug paid for under the Medicaid program.
"(4)
"(5)
"(A) the total amount paid for each such branded prescription drug procured by the Department of Defense for its beneficiaries, and
"(B) for each such branded prescription drug dispensed under the TRICARE retail pharmacy program, the product of—
"(i) the per-unit ingredient cost, minus any per-unit rebate paid by the covered entity, and
"(ii) the number of units of the branded prescription drug dispensed under such program.
"(h)
"(i)
"(j)
"(k)
[
Imposition of Annual Fee on Medical Device Manufacturers and Importers
[
Imposition of Annual Fee on Health Insurance Providers
[
1 Section numbers editorially supplied.
CHAPTER 31 —RETAIL EXCISE TAXES
Editorial Notes
Prior Provisions
The provisions of a prior
Subchapter (A), Jewelry and related items, comprising sections 4001 to 4003;
Subchapter (B), Furs, comprising sections 4011 to 4013;
Subchapter (C), Toilet preparations, comprising sections 4021 and 4022;
Subchapter (D), Luggage, handbags, etc., comprising section 4031;
Subchapter (E), Special fuels, comprising sections 4041 and 4042; and
Subchapter (F), Special provisions applicable to retailers tax, comprising sections 4051 to 4058.
The headings for subchs. (A) to (D) were struck out by section 101(b)(1) and the listed sections were repealed by section 101(a) of
The headings for subchs. (E) and (F) were stricken by section 1904(a)(1)(A) of
The subject matter of the prior sections was as follows:
A prior section 4001, acts Aug. 16, 1954, ch. 736,
A prior section 4002, act Aug. 16, 1954, ch. 736,
A prior section 4003, acts Aug. 16, 1954, ch. 736,
A prior section 4011, act Aug. 16, 1954, ch. 736,
A prior section 4012, act Aug. 16, 1954, ch. 736,
A prior section 4013, act Aug. 16, 1954, ch. 736,
A prior section 4021, acts Aug. 16, 1954, ch. 736,
A prior section 4022, act Aug. 16, 1954, ch. 736,
A prior section 4031, acts Aug. 16, 1954, ch. 736,
A prior section 4042, act Aug. 16, 1954, ch. 736,
A prior section 4051, act Aug. 16, 1954, ch. 736,
A prior section 4052, act Aug. 16, 1954, ch. 736,
A prior section 4053, acts Aug. 16, 1954, ch. 736,
A prior section 4054, act Aug. 16, 1954, ch. 736,
A prior section 4055, act Aug. 16, 1954, ch. 736,
A prior section 4056, act Aug. 16, 1954, ch. 736,
A prior section 4057, added
A prior section 4058, act Aug. 16, 1954, ch. 736,
Amendments
2014—
1993—
1990—
1983—
1976—
1 Section numbers editorially supplied.
[Subchapter A—Repealed]
Editorial Notes
Prior Provisions
This subchapter consisted of part I with subparts A (§§4001–4004) and B (§§4006, 4007) and part II (§§4011, 4012), prior to being amended generally by
Another prior subchapter A of
[§§4001 to 4003. Repealed. Pub. L. 113–295, div. A, title II, §221(a)(103)(A), Dec. 19, 2014, 128 Stat. 4052 ]
Section 4001, added
Section 4002, added
Section 4003, added
Prior
Section 4004, added
Section 4006, added
Section 4007, added
Section 4011, added
Section 4012, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of
Subchapter B—Special Fuels
Editorial Notes
Prior Provisions
A prior subchapter B of
Amendments
2012—
1990—
1978—
1976—
§4041. Imposition of tax
(a) Diesel fuel and special motor fuels
(1) Tax on diesel fuel and kerosene in certain cases
(A) In general
There is hereby imposed a tax on any liquid other than gasoline (as defined in section 4083)—
(i) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle or a diesel-powered train for use as a fuel in such vehicle or train, or
(ii) used by any person as a fuel in a diesel-powered highway vehicle or a diesel-powered train unless there was a taxable sale of such fuel under clause (i).
(B) Exemption for previously taxed fuel
No tax shall be imposed by this paragraph on the sale or use of any liquid if tax was imposed on such liquid under section 4081 (other than such tax at the Leaking Underground Storage Tank Trust Fund financing rate) and the tax thereon was not credited or refunded.
(C) Rate of tax
(i) In general
Except as otherwise provided in this subparagraph, the rate of the tax imposed by this paragraph shall be the rate of tax specified in section 4081(a)(2)(A) on diesel fuel which is in effect at the time of such sale or use.
(ii) Rate of tax on trains
In the case of any sale for use, or use, of diesel fuel in a train, the rate of tax imposed by this paragraph shall be—
(I) 3.3 cents per gallon after December 31, 2004, and before July 1, 2005,
(II) 2.3 cents per gallon after June 30, 2005, and before January 1, 2007, and
(III) 0 after December 31, 2006.
(iii) Rate of tax on certain buses
(I) In general
Except as provided in subclause (II), in the case of fuel sold for use or used in a use described in section 6427(b)(1) (after the application of section 6427(b)(3)), the rate of tax imposed by this paragraph shall be 7.3 cents per gallon (4.3 cents per gallon after September 30, 2028).
(II) School bus and intracity transportation
No tax shall be imposed by this paragraph on any sale for use, or use, described in subparagraph (B) or (C) of section 6427(b)(2).
(2) Alternative fuels
(A) In general
There is hereby imposed a tax on any liquid (other than gas oil, fuel oil, or any product taxable under section 4081 (other than such tax at the Leaking Underground Storage Tank Trust Fund financing rate))—
(i) sold by any person to an owner, lessee, or other operator of a motor vehicle or motorboat for use as a fuel in such motor vehicle or motorboat, or
(ii) used by any person as a fuel in a motor vehicle or motorboat unless there was a taxable sale of such liquid under clause (i).
(B) Rate of tax
The rate of the tax imposed by this paragraph shall be—
(i) except as otherwise provided in this subparagraph, the rate of tax specified in section 4081(a)(2)(A)(i) which is in effect at the time of such sale or use,
(ii) in the case of liquefied petroleum gas, 18.3 cents per energy equivalent of a gallon of gasoline,
(iii) in the case of any liquid fuel (other than ethanol and methanol) derived from coal (including peat) and liquid hydrocarbons derived from biomass (as defined in section 45K(c)(3)), 24.3 cents per gallon, and
(iv) in the case of liquefied natural gas, 24.3 cents per energy equivalent of a gallon of diesel.
(C) Energy equivalent of a gallon of gasoline
For purposes of this paragraph, the term "energy equivalent of a gallon of gasoline" means, with respect to a liquefied petroleum gas fuel, the amount of such fuel having a Btu content of 115,400 (lower heating value). For purposes of the preceding sentence, a Btu content of 115,400 (lower heating value) is equal to 5.75 pounds of liquefied petroleum gas.
(D) Energy equivalent of a gallon of diesel
For purposes of this paragraph, the term "energy equivalent of a gallon of diesel" means, with respect to a liquefied natural gas fuel, the amount of such fuel having a Btu content of 128,700 (lower heating value). For purposes of the preceding sentence, a Btu content of 128,700 (lower heating value) is equal to 6.06 pounds of liquefied natural gas.
(3) Compressed natural gas
(A) In general
There is hereby imposed a tax on compressed natural gas—
(i) sold by any person to an owner, lessee, or other operator of a motor vehicle or motorboat for use as a fuel in such motor vehicle or motorboat, or
(ii) used by any person as a fuel in a motor vehicle or motorboat unless there was a taxable sale of such gas under clause (i).
The rate of the tax imposed by this paragraph shall be 18.3 cents per energy equivalent of a gallon of gasoline.
(B) Bus uses
No tax shall be imposed by this paragraph on any sale for use, or use, described in subparagraph (B) or (C) of section 6427(b)(2) (relating to school bus and intracity transportation).
(C) Administrative provisions
For purposes of applying this title with respect to the taxes imposed by this subsection, references to any liquid subject to tax under this subsection shall be treated as including references to compressed natural gas subject to tax under this paragraph, and references to gallons shall be treated as including references to energy equivalent of a gallon of gasoline with respect to such gas.
(D) Energy equivalent of a gallon of gasoline
For purposes of this paragraph, the term "energy equivalent of a gallon of gasoline" means 5.66 pounds of compressed natural gas.
(b) Exemption for off-highway business use; reduction in tax for qualified methanol and ethanol fuel
(1) Exemption for off-highway business use
(A) In general
No tax shall be imposed by subsection (a) on liquids sold for use or used in an off-highway business use.
(B) Tax where other use
If a liquid on which no tax was imposed by reason of subparagraph (A) is used otherwise than in an off-highway business use, a tax shall be imposed by paragraph (1)(B), (2)(B), or (3)(A)(ii) of subsection (a) (whichever is appropriate) and by the corresponding provision of subsection (d)(1) (if any).
(C) Off-highway business use defined
For purposes of this subsection, the term "off-highway business use" has the meaning given to such term by section 6421(e)(2); except that such term shall not, for purposes of subsection (a)(1), include use in a diesel-powered train.
(2) Qualified methanol and ethanol fuel
(A) In general
In the case of any qualified methanol or ethanol fuel—
(i) the rate applicable under subsection (a)(2) shall be the applicable blender rate per gallon less than the otherwise applicable rate (6 cents per gallon in the case of a mixture none of the alcohol in which consists of ethanol), and
(ii) subsection (d)(1) shall be applied by substituting "0.05 cent" for "0.1 cent" with respect to the sales and uses to which clause (i) applies.
(B) Qualified methanol and ethanol fuel produced from coal
The term "qualified methanol or ethanol fuel" means any liquid at least 85 percent of which consists of methanol, ethanol, or other alcohol produced from coal (including peat).
(C) Applicable blender rate
For purposes of subparagraph (A)(i), the applicable blender rate is—
(i) except as provided in clause (ii), 5.4 cents, and
(ii) for sales or uses during calendar years 2001 through 2008, 1/10 of the blender amount applicable under section 40(h)(2) for the calendar year in which the sale or use occurs.
(D) Termination
On and after January 1, 2009, subparagraph (A) shall not apply.
(c) Certain liquids used as a fuel in aviation
(1) In general
There is hereby imposed a tax upon any liquid for use as a fuel other than aviation gasoline—
(A) sold by any person to an owner, lessee, or other operator of an aircraft for use in such aircraft, or
(B) used by any person in an aircraft unless there was a taxable sale of such fuel under subparagraph (A).
(2) Exemption for previously taxed fuel
No tax shall be imposed by this subsection on the sale or use of any liquid for use as a fuel other than aviation gasoline if tax was imposed on such liquid under section 4081 (other than such tax at the Leaking Underground Storage Tank Trust Fund financing rate) and the tax thereon was not credited or refunded.
(3) Rate of tax
The rate of tax imposed by this subsection shall be 21.8 cents per gallon (4.3 cents per gallon with respect to any sale or use for commercial aviation).
(d) Additional taxes to fund Leaking Underground Storage Tank Trust Fund
(1) Tax on sales and uses subject to tax under subsection (a)
In addition to the taxes imposed by subsection (a), there is hereby imposed a tax of 0.1 cent a gallon on the sale or use of any liquid (other than liquefied petroleum gas and other than liquefied natural gas) if tax is imposed by subsection (a)(1) or (2) on such sale or use. No tax shall be imposed under the preceding sentence on the sale or use of any liquid if tax was imposed with respect to such liquid under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.
(2) Liquids used in aviation
In addition to the taxes imposed by subsection (c), there is hereby imposed a tax of 0.1 cent a gallon on any liquid (other than gasoline (as defined in section 4083))—
(A) sold by any person to an owner, lessee, or other operator of an aircraft for use as a fuel in such aircraft, or
(B) used by any person as a fuel in an aircraft unless there was a taxable sale of such liquid under subparagraph (A).
No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4081.
(3) Diesel fuel used in trains
In the case of any sale for use or use after December 31, 2006, there is hereby imposed a tax of 0.1 cent per gallon on any liquid other than gasoline (as defined in section 4083)—
(A) sold by any person to an owner, lessee, or other operator of a diesel-powered train for use as a fuel in such train, or
(B) used by any person as a fuel in a diesel-powered train unless there was a taxable sale of such fuel under subparagraph (A).
No tax shall be imposed by this paragraph on the sale or use of any liquid if tax was imposed on such liquid under section 4081.
(4) Termination
The taxes imposed by this subsection shall not apply during any period during which the Leaking Underground Storage Tank Trust Fund financing rate under section 4081 does not apply.
(5) Nonapplication of exemptions other than for exports
For purposes of this section, the tax imposed under this subsection shall be determined without regard to subsections (b)(1)(A), (f), (g), (h), and (l). The preceding sentence shall not apply with respect to subsection (g)(3) and so much of subsection (g)(1) as relates to vessels (within the meaning of section 4221(d)(3)) employed in foreign trade or trade between the United States and any of its possessions.
[(e) Repealed. Pub. L. 108–357, title VIII, §853(d)(2)(C), Oct. 22, 2004, 118 Stat. 1613 ]
(f) Exemption for farm use
(1) Exemption
Under regulations prescribed by the Secretary, no tax shall be imposed under this section on any liquid sold for use or used on a farm for farming purposes.
(2) Use on a farm for farming purposes
For purposes of paragraph (1) of this subsection, use on a farm for farming purposes shall be determined in accordance with paragraphs (1), (2), and (3) of section 6420(c).
(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;
(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; and
(5) with respect to the sale of any liquid to a qualified blood collector organization (as defined in section 7701(a)(49)) for such organization's exclusive use in the collection, storage, or transportation of blood.
For purposes of paragraph (4), the term "nonprofit educational organization" means an educational 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.
(h) Exemption for use by certain aircraft museums
(1) Exemption
Under regulations prescribed by the Secretary, no tax shall be imposed under this section on any liquid sold for use or used by an aircraft museum in an aircraft or vehicle owned by such museum and used exclusively for purposes set forth in paragraph (2)(C).
(2) Definition of aircraft museum
For purposes of this subsection, the term "aircraft museum" means an organization—
(A) described in section 501(c)(3) which is exempt from income tax under section 501(a),
(B) operated as a museum under charter by a State or the District of Columbia, and
(C) operated exclusively for the procurement, care, and exhibition of aircraft of the type used for combat or transport in World War II.
[(i) Repealed. Pub. L. 108–357, title VIII, §853(d)(2)(D), Oct. 22, 2004, 118 Stat. 1613 ]
(j) 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.
[(k) Repealed. Pub. L. 108–357, title III, §301(c)(6), Oct. 22, 2004, 118 Stat. 1461 ]
(l) Exemption for certain uses
No tax shall be imposed under this section on any liquid sold for use in, or used in, a helicopter or a fixed-wing aircraft for purposes of providing transportation with respect to which the requirements of subsection (f) or (g) of section 4261 are met.
(m) Certain alcohol fuels
(1) In general
In the case of the sale or use of any partially exempt methanol or ethanol fuel the rate of the tax imposed by subsection (a)(2) shall be—
(A) after September 30, 1997, and before October 1, 2028—
(i) in the case of fuel none of the alcohol in which consists of ethanol, 9.15 cents per gallon, and
(ii) in any other case, 11.3 cents per gallon, and
(B) after September 30, 2028—
(i) in the case of fuel none of the alcohol in which consists of ethanol, 2.15 cents per gallon, and
(ii) in any other case, 4.3 cents per gallon.
(2) Partially exempt methanol or ethanol fuel
The term "partially exempt methanol or ethanol fuel" means any liquid at least 85 percent of which consists of methanol, ethanol, or other alcohol produced from natural gas.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2021—Subsec. (a)(1)(C)(iii)(I).
Subsec. (m)(1)(A).
Subsec. (m)(1)(B).
2015—Subsec. (a)(1)(C)(iii)(I).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(2)(B)(iii).
Subsec. (a)(2)(B)(iv).
Subsec. (a)(2)(C).
Subsec. (a)(2)(D).
Subsec. (a)(3)(D).
Subsec. (m)(1)(A).
Subsec. (m)(1)(B).
2012—Subsec. (a)(1)(C)(iii)(I).
Subsec. (m)(1)(A).
Subsec. (m)(1)(B).
2011—Subsec. (a)(1)(C)(iii)(I).
Subsec. (m)(1)(A).
Subsec. (m)(1)(B).
2007—Subsec. (d)(1).
Subsec. (d)(5).
2006—Subsec. (b)(2)(B).
Subsec. (b)(2)(C)(ii).
Subsec. (b)(2)(D).
Subsec. (g)(5).
2005—Subsec. (a)(1)(B).
Subsec. (a)(1)(C)(iii)(I).
Subsec. (a)(2).
Subsec. (a)(2)(A).
Subsec. (a)(2)(B).
Subsec. (a)(2)(B)(i).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(2)(B)(iii).
Subsec. (a)(3)(A).
Subsec. (a)(3)(C).
Subsec. (b)(1)(A).
Subsec. (c).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (d)(5).
Subsec. (m)(1)(A), (B).
2004—Subsec. (a)(1).
Subsec. (a)(1)(B).
Subsec. (a)(1)(C)(ii)(I) to (III).
"(I) 6.8 cents per gallon after September 30, 1993, and before October 1, 1995,
"(II) 5.55 cents per gallon after September 30, 1995, and before November 1, 1998, and
"(III) 4.3 cents per gallon after October 31, 1998."
Subsec. (b)(2)(B).
Subsec. (c).
Subsec. (d)(2).
Subsec. (d)(3), (4).
Subsec. (e).
Subsec. (i).
Subsec. (k).
Subsec. (m)(1).
1998—Subsec. (a)(1)(C)(ii)(II).
Subsec. (a)(1)(C)(ii)(III).
Subsec. (a)(1)(C)(iii)(I).
Subsec. (a)(2)(B).
Subsec. (b)(2)(A)(i).
Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (k)(3).
Subsec. (l).
Subsec. (m)(1)(A).
1997—Subsec. (a)(1)(A).
Subsec. (a)(1)(D).
"(i) no tax shall be imposed by subsection (a) or (d)(1) during the period beginning on the date which is 7 days after the date of the enactment of the Small Business Job Protection Act of 1996 and ending on December 31, 1997,
"(ii) effective during the period after September 30, 1999, and before January 1, 2000, the rate of tax imposed by this paragraph is 24.3 cents per gallon, and
"(iii) the termination of the tax under subsection (d) shall not occur before January 1, 2000."
Subsec. (a)(2).
"(A) sold by any person to an owner, lessee, or other operator of a motor vehicle or motorboat for use as a fuel in such motor vehicle or motorboat, or
"(B) used by any person as a fuel in a motor vehicle or motorboat unless there was a taxable sale of such liquid under subparagraph (A).
The rate of the tax imposed by this paragraph shall be the rate of tax specified in section 4081(a)(2)(A)(i) on gasoline which is in effect at the time of such sale or use."
Subsec. (a)(2)(A).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(3)(B).
Subsec. (d)(1).
Subsec. (l).
Subsec. (m)(1)(A).
"(i) 11.3 cents per gallon after September 30, 1993, and before October 1, 1999, and
"(ii) 4.3 cents per gallon after September 30, 1999, and".
1996—Subsec. (a)(1)(D).
Subsec. (c)(2).
"(2)
"(A) sold by any person to an owner, lessee, or other operator of an aircraft, for use as a fuel in such aircraft in noncommercial aviation; or
"(B) used by any person as a fuel in an aircraft in noncommercial aviation, unless there was a taxable sale of such product under subparagraph (A).
The tax imposed by this paragraph shall be in addition to any tax imposed under section 4081."
Subsec. (c)(3).
"(3)
Subsec. (c)(4).
Subsec. (c)(5).
Subsec. (k)(1)(A) to (C).
1993—Subsec. (a)(1).
"(A) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle or diesel-powered boat for use as a fuel in such vehicle or boat, or
"(B) used by any person as a fuel in a diesel-powered highway vehicle or diesel-powered boat unless there was a taxable sale of such liquid under subparagraph (A).
The rate of the tax imposed by this paragraph shall be the sum of the Highway Trust Fund financing rate and the diesel fuel deficit reduction rate in effect under section 4091 at the time of such sale or use. No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091."
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b)(1)(B).
Subsec. (b)(1)(C).
Subsec. (b)(2)(A)(i).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(5).
Subsec. (d)(1).
Subsec. (d)(2).
"(A) sold by any person to an owner, lessee, or other operator of a diesel-powered train for use as a fuel in such train, or
"(B) used by any person as a fuel in a diesel-powered train unless there was a taxable sale of such liquid under subparagraph (A).
No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091."
Subsec. (d)(3), (4).
Subsec. (f)(3).
Subsec. (g).
Subsec. (k)(1)(A).
Subsec. (k)(1)(B).
Subsec. (m)(1)(A).
"(i) the Highway Trust Fund financing rate shall be 5.75 cents per gallon, and
"(ii) the deficit reduction rate shall be 5.55 cents per gallon."
Subsec. (m)(1)(B).
1991—Subsecs. (f)(3), (g).
1990—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b)(2)(A)(i).
Subsec. (b)(2)(C).
Subsec. (c)(1).
Subsec. (c)(3).
Subsec. (c)(5).
Subsec. (c)(6).
Subsecs. (f)(3), (g).
Subsec. (k)(1)(A).
Subsec. (k)(1)(B).
Subsec. (k)(1)(C).
Subsec. (k)(3).
Subsec. (m)(1)(A).
Subsec. (m)(1)(B).
1988—Subsec. (b)(1)(A).
Subsec. (b)(1)(B).
Subsec. (b)(1)(C).
Subsec. (b)(2)(A).
Subsec. (b)(3).
Subsec. (c)(3).
Subsec. (f)(3).
1987—Subsec. (a)(1).
Subsec. (a)(3).
Subsec. (b)(2)(C).
Subsec. (c)(1).
Subsec. (c)(5).
Subsec. (c)(6).
Subsec. (d)(1).
"(A) sold by any person to an owner, lessee, or other operator of a motor vehicle, motorboat, or train for use as a fuel in such motor vehicle, motorboat, or train, or
"(B) used by any person as a fuel in a motor vehicle, motorboat, or train unless there was a taxable sale of such liquid under subparagraph (A)."
Subsec. (d)(2).
"(A) sold by any person to an owner, lessee, or other operator of an aircraft for use as a fuel in such aircraft, or
"(B) used by any person as a fuel in an aircraft unless there was a taxable sale of such liquid under subparagraph (A).
The tax imposed by this paragraph shall not apply to any product taxable under section 4081 which is used as a fuel in an aircraft other than in noncommercial aviation."
Subsec. (d)(3), (4).
Subsecs. (f)(3), (g).
Subsec. (k)(3).
Subsec. (l).
"(1) transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas, or
"(2) the planting, cultivation, cutting or transportation of, or caring for, trees (including logging operation),
but only if the helicopter does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to the Airport and Airway Improvement Act of 1982 during such use."
Subsec. (n).
1986—Subsec. (b).
Subsec. (b)(2)(A).
Subsec. (b)(3).
Subsecs. (d), (e).
Subsec. (f)(3).
Subsec. (g).
Subsec. (l)(1).
"transporting individuals, equipment, or supplies in—
"(A) the exploration for, or the development or removal of, hard minerals, or
"(B) the exploration for oil or gas, or".
Subsec. (n).
1984—Subsec. (a)(1).
Subsec. (k)(1).
Subsec. (l)(1).
Subsec. (m).
1983—Subsec. (a).
Subsec. (b).
Subsec. (c)(3).
Subsec. (e).
Subsec. (f)(3).
Subsec. (g).
Subsec. (k).
1982—Subsec. (c).
Subsec. (l).
1980—Subsec. (c)(5).
Subsec. (k)(3).
1978—Subsec. (b).
Subsec. (c)(3).
Subsec. (e).
Subsec. (h)(2).
Subsecs. (i), (j).
Subsec. (k).
1976—Subsec. (c)(3).
Subsec. (e).
Subsec. (f)(1).
Subsec. (g).
Subsec. (h).
Subsec. (i).
1970—Subsec. (b).
Subsec. (c).
Subsec. (c)(3).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Subsec. (h).
1965—Subsec. (b).
1961—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (f).
1959—Subsecs. (a), (b).
Subsec. (f).
1958—Subsec. (e).
1956—Subsec. (a). Act June 29, 1956, §202(a), increased tax on diesel fuel from 2 cents a gallon to 3 cents a gallon, and inserted provisions which retained tax at 2 cents a gallon for diesel fuel used in vehicles not registered, and not required to be registered, for highway use, or vehicles owned by the United States and not used on the highway.
Subsec. (b). Act June 29, 1956, §202(b), increased tax on special motor fuels from 2 cents a gallon to 3 cents a gallon, and inserted provisions which retained tax at 2 cents a gallon for special motor fuels sold for use or used otherwise than as a fuel for the propulsion of a highway vehicle which is registered, or is required to be registered, for highway use, or vehicles owned by the United States used on the highway.
Subsec. (c). Act June 29, 1956, §202(c), substituted "July 1, 1972" for "April 1, 1956" and provided for nonapplication of second and third sentences of subsec. (a) and (b).
Act Mar. 29, 1956, substituted "April 1, 1957" for "April 1, 1956".
Subsec. (d). Act Apr. 2, 1956, added subsec. (d).
1955—Subsec. (c). Act Mar. 30, 1955, substituted "April 1, 1956" for "April 1, 1955".
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 2015 Amendment
Effective and Termination Dates of 2012 Amendment
Amendment by
"(1)
"(2)
Effective Date of 2011 Amendment
Effective Date of 2007 Amendment
Amendments by
Effective Date of 2006 Amendment
"(1)
"(2)
Effective Date of 2005 Amendments
Amendment by section 11151(e)(2) of
"(1)
"(2)
Effective Date of 2004 Amendment
Amendment by section 301(c)(5), (6) of
Effective Date of 1998 Amendments
Amendment by
Amendment by section 9003(b)(2)(A) of
Effective Date of 1997 Amendments
"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section and
"(2) The amendment made by subsection (d) [amending
Amendment by section 1601(f)(4)(A), (B) of
Effective Date of 1996 Amendment
Effective Date of 1993 Amendment
Effective Date of 1990 Amendment
Effective Date of 1988 Amendment
Amendment by section 1017(c)(3), (4) of
Amendment by section 2001(d)(2), (3)(A)–(D) of
Effective Date of 1987 Amendments
Amendment by
Effective Date of 1986 Amendments
Amendment by section 1878(c)(1) of
Effective Date of 1984 Amendment
Amendment by section 911(a) of
Amendment by section 912(a) of
Effective Date of 1983 Amendment
"(1)
"(2)
"(3)
"(4)
Effective Date of 1982 Amendment
Effective Date of 1978 Amendments
Amendment by section 233(a)(3)(B) of
Amendment by
Effective Date of 1976 Amendments
Effective Date of 1970 Amendment
"(a)
"(b)
Effective Date of 1965 Amendment
Effective Date of 1961 Amendment
"(a) Except as provided in subsection (b), the amendments made by this title [enacting
"(b)(1) The amendments made by sections 201, 202, and 203 [enacting
"(2) The amendments made by section 205(a), (c), and (d) [amending
"(3) The amendment made by section 205(b) [amending
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1956 Amendments
Act June 29, 1956, ch. 462, title II, §211,
Act Apr. 2, 1956, ch. 160, §2(a)(2),
Short Title of 1970 Amendment
Short Title of 1956 Amendments
Act June 29, 1956, ch. 462, title II, §201(a),
Act Mar. 29, 1956, ch. 115, §1,
Short Title of 1955 Amendment
Act Mar. 30, 1955, ch. 18, §1,
Delayed Deposits of Highway Motor Fuel Tax Revenues
Due date for deposit of taxes imposed by this section which would be required to be made after July 31, 1998, and before Oct. 1, 1998, to be Oct. 5, 1998, see section 901(e) of
Floor Stocks Taxes
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Study by Secretary of the Treasury; Report to Congress
Study of Imported Alcohol by Secretary of the Treasury
Reports on Use of Alcohol in Fuel
"(1) a description of the firms engaged in the alcohol fuel industry,
"(2) the amount of alcohol fuel sold in each State, and the amount of gasoline saved in each State by reason of the use of alcohol fuels,
"(3) the revenue loss resulting from the exemptions from tax for alcohol fuels under sections 4041(k) and 4081(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] and the credit allowable under section 44E [now 40] of such Code and the impact of such revenue loss on the Highway Trust Fund, and
"(4) the cost of production and the retail cost of alcohol fuels as compared to gasoline and special fuels not mixed with alcohol."
§4042. Tax on fuel used in commercial transportation on inland waterways
(a) In general
There is hereby imposed a tax on any liquid used during any calendar quarter by any person as a fuel in a vessel in commercial waterway transportation.
(b) Amount of tax
(1) In general
The rate of the tax imposed by subsection (a) is the sum of—
(A) the Inland Waterways Trust Fund financing rate, and
(B) the Leaking Underground Storage Tank Trust Fund financing rate.
(2) Rates
For purposes of paragraph (1)—
(A) The Inland Waterways Trust Fund financing rate is 29 cents per gallon.
(B) The Leaking Underground Storage Tank Trust Fund financing rate is 0.1 cent per gallon.
(3) Exception for fuel on which Leaking Underground Storage Tank Trust Fund financing rate separately imposed
The Leaking Underground Storage Tank Trust Fund financing rate under paragraph (2)(B) shall not apply to the use of any fuel if tax was imposed with respect to such fuel under section 4041(d) or 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.
(4) Termination of Leaking Underground Storage Tank Trust Fund financing rate
The Leaking Underground Storage Tank Trust Fund financing rate under paragraph (2)(B) shall not apply during any period during which the Leaking Underground Storage Tank Trust Fund financing rate under section 4081 does not apply.
(c) Exemptions
(1) Deep-draft ocean-going vessels
The tax imposed by subsection (a) shall not apply with respect to any vessel designed primarily for use on the high seas which has a draft of more than 12 feet.
(2) Passenger vessels
The tax imposed by subsection (a) shall not apply with respect to any vessel used primarily for the transportation of persons.
(3) Use by State or local government in transporting property in a state or local business
Subparagraph (B) of subsection (d)(1) shall not apply with respect to use by a State or political subdivision thereof.
(4) Use in moving lash and seabee ocean-going barges
The tax imposed by subsection (a) shall not apply with respect to use for movement by tug of exclusively LASH (Lighter-aboard-ship) and SEABEE ocean-going barges released by their ocean-going carriers solely to pick up or deliver international cargoes.
(d) Definitions
For purposes of this section—
(1) Commercial waterway transportation
The term "commercial waterway transportation" means any use of a vessel on any inland or intracoastal waterway of the United States—
(A) in the business of transporting property for compensation or hire, or
(B) in transporting property in the business of the owner, lessee, or operator of the vessel (other than fish or other aquatic animal life caught on the voyage).
(2) Inland or intracoastal waterway of the United States
The term "inland or intracoastal waterway of the United States" means any inland or intracoastal waterway of the United States which is described in section 206 of the Inland Waterways Revenue Act of 1978.
(3) Person
The term "person" includes the United States, a State, a political subdivision of a State, or any agency or instrumentality of any of the foregoing.
(e) Date for filing return
The date for filing the return of the tax imposed by this section for any calendar quarter shall be the last day of the first month following such quarter.
(Added
Editorial Notes
References in Text
Section 206 of the Inland Waterways Revenue Act of 1978, referred to in subsec. (d)(2), is section 206 of
Prior Provisions
A prior section 4042, act Aug. 16, 1954, ch. 736,
Amendments
2018—Subsec. (b)(1)(C).
Subsec. (b)(2)(C).
"(i) 3.3 cents per gallon after December 31, 2004, and before July 1, 2005,
"(ii) 2.3 cents per gallon after June 30, 2005, and before January 1, 2007, and
"(iii) 0 after December 31, 2006."
2014—Subsec. (b)(2)(A).
2007—Subsec. (b)(3).
2004—Subsec. (b)(2)(C).
1993—Subsec. (b)(1)(C).
Subsec. (b)(2)(C).
1988—Subsec. (b)(2).
"(A) the Inland Waterways Trust Fund financing rate is 10 cents a gallon, and
"(B) the Leaking Underground Storage Tank Trust Fund financing rate is 0.1 cents a gallon."
1986—Subsec. (b).
| "If the use occurs— | The tax is— |
|---|---|
| After September 30, 1980 and before October 1, 1981 | 4 cents a gallon |
| After September 30, 1981 and before October 1, 1983 | 6 cents a gallon |
| After September 30, 1983 and before October 1, 1985 | 8 cents a gallon |
| After September 30, 1985 | 10 cents a gallon". |
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Effective Date of 2007 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1988 Amendment
Effective Date of 1986 Amendments
Amendment by
Effective Date
Savings Provision
For provisions that nothing in amendment by
Construction of 1986 Amendments
§4043. Surtax on fuel used in aircraft part of a fractional ownership program
(a) In general
There is hereby imposed a tax on any liquid used (during any calendar quarter by any person) in a fractional program aircraft as fuel—
(1) for the transportation of a qualified fractional owner with respect to the fractional ownership aircraft program of which such aircraft is a part, or
(2) with respect to the use of such aircraft on account of such a qualified fractional owner, including use in deadhead service.
(b) Amount of tax
The rate of tax imposed by subsection (a) is 14.1 cents per gallon.
(c) Definitions and special rules
For purposes of this section—
(1) Fractional program aircraft
The term "fractional program aircraft" means, with respect to any fractional ownership aircraft program, any aircraft which—
(A) is listed as a fractional program aircraft in the management specifications issued to the manager of such program by the Federal Aviation Administration under subpart K of part 91 of title 14, Code of Federal Regulations, and
(B) is registered in the United States.
(2) Fractional ownership aircraft program
The term "fractional ownership aircraft program" means a program under which—
(A) a single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners,
(B) there are 1 or more fractional owners per fractional program aircraft, with at least 1 fractional program aircraft having more than 1 owner,
(C) with respect to at least 2 fractional program aircraft, none of the ownership interests in such aircraft are—
(i) less than the minimum fractional ownership interest, or
(ii) held by the program manager referred to in subparagraph (A),
(D) there exists a dry-lease aircraft exchange arrangement among all of the fractional owners, and
(E) there are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program.
(3) Definitions related to fractional ownership interests
(A) Qualified fractional owner
The term "qualified fractional owner" means any fractional owner which has a minimum fractional ownership interest in at least one fractional program aircraft.
(B) Minimum fractional ownership interest
The term "minimum fractional ownership interest" means, with respect to each type of aircraft—
(i) a fractional ownership interest equal to or greater than 1/16 of at least 1 subsonic, fixed wing, or powered lift aircraft, or
(ii) a fractional ownership interest equal to or greater than 1/32 of at least 1 rotorcraft aircraft.
(C) Fractional ownership interest
The term "fractional ownership interest" means—
(i) the ownership of an interest in a fractional program aircraft,
(ii) the holding of a multi-year leasehold interest in a fractional program aircraft, or
(iii) the holding of a multi-year leasehold interest which is convertible into an ownership interest in a fractional program aircraft.
(D) Fractional owner
The term "fractional owner" means any person owning any interest (including the entire interest) in a fractional program aircraft.
(4) Dry-lease aircraft exchange
The term "dry-lease aircraft exchange" means an agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as needed basis without crew, to each fractional owner.
(5) Special rule relating to use of fractional program aircraft for flight demonstration, maintenance, or training
For purposes of subsection (a), a fractional program aircraft shall not be considered to be used for the transportation of a qualified fractional owner, or on account of such qualified fractional owner, when it is used for flight demonstration, maintenance, or crew training.
(6) Special rule relating to deadhead service
A fractional program aircraft shall not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service.
(d) Termination
This section shall not apply to liquids used as a fuel in an aircraft after May 10, 2024.
(Added
Editorial Notes
Amendments
2024—Subsec. (d).
2023—Subsec. (d).
2018—Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date
Subchapter C—Heavy Trucks and Trailers
Editorial Notes
Amendments
1990—
§4051. Imposition of tax on heavy trucks and trailers sold at retail
(a) Imposition of tax
(1) In general
There is hereby imposed on the first retail sale of the following articles (including in each case parts or accessories sold on or in connection therewith or with the sale thereof) a tax of 12 percent of the amount for which the article is so sold:
(A) Automobile truck chassis.
(B) Automobile truck bodies.
(C) Truck trailer and semitrailer chassis.
(D) Truck trailer and semitrailer bodies.
(E) Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.
(2) Exclusion for trucks weighing 33,000 pounds or less
The tax imposed by paragraph (1) shall not apply to automobile truck chassis and automobile truck bodies, suitable for use with a vehicle which has a gross vehicle weight of 33,000 pounds or less (as determined under regulations prescribed by the Secretary).
(3) Exclusion for trailers weighing 26,000 pounds or less
The tax imposed by paragraph (1) shall not apply to truck trailer and semitrailer chassis and bodies, suitable for use with a trailer or semitrailer which has a gross vehicle weight of 26,000 pounds or less (as determined under regulations prescribed by the Secretary).
(4) Exclusion for tractors weighing 19,500 pounds or less
The tax imposed by paragraph (1) shall not apply to tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer if—
(A) such tractor has a gross vehicle weight of 19,500 pounds or less (as determined by the Secretary), and
(B) such tractor, in combination with a trailer or semitrailer, has a gross combined weight of 33,000 pounds or less (as determined by the Secretary).
(5) Sale of trucks, etc., treated as sale of chassis and body
For purposes of this subsection, a sale of an automobile truck or truck trailer or semitrailer shall be considered to be a sale of a chassis and of a body described in paragraph (1).
(b) Separate purchase of truck or trailer and parts and accessories therefor
Under regulations prescribed by the Secretary—
(1) In general
If—
(A) the owner, lessee, or operator of any vehicle which contains an article taxable under subsection (a) installs (or causes to be installed) any part or accessory on such vehicle, and
(B) such installation is not later than the date 6 months after the date such vehicle (as it contains such article) was first placed in service,
then there is hereby imposed on such installation a tax equal to 12 percent of the price of such part or accessory and its installation.
(2) Exceptions
Paragraph (1) shall not apply if—
(A) the part or accessory installed is a replacement part or accessory, or
(B) the aggregate price of the parts and accessories (and their installation) described in paragraph (1) with respect to any vehicle does not exceed $1,000 (or such other amount or amounts as the Secretary may by regulations prescribe).
(3) Installers secondarily liable for tax
The owners of the trade or business installing the parts or accessories shall be secondarily liable for the tax imposed by paragraph (1).
(c) Termination
On and after October 1, 2028, the taxes imposed by this section shall not apply.
(d) Credit against tax for tire tax
If—
(1) tires are sold on or in connection with the sale of any article, and
(2) tax is imposed by this subchapter on the sale of such tires,
there shall be allowed as a credit against the tax imposed by this subchapter an amount equal to the tax (if any) imposed by section 4071 on such tires.
(Added
Editorial Notes
Prior Provisions
A prior section 4051, act Aug. 16, 1954, ch. 736,
Amendments
2021—Subsec. (c).
2018—Subsec. (a)(3).
2015—Subsec. (c).
2012—Subsec. (c).
2011—Subsec. (c).
2005—Subsec. (a)(4), (5).
Subsec. (c).
1998—Subsec. (c).
1997—Subsec. (b)(2)(B).
Subsec. (d).
Subsec. (e).
1991—Subsec. (c).
1990—Subsec. (c).
1987—Subsec. (c).
1986—Subsec. (d)(1).
Subsec. (d)(3).
1984—Subsec. (b)(3).
Subsecs. (d), (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2005 Amendment
Effective Date of 1997 Amendment
Effective Date of 1986 Amendment
Amendment by section 1877(c) of
Effective Date of 1984 Amendment
Effective Date
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4052. Definitions and special rules
(a) First retail sale
For purposes of this subchapter—
(1) In general
The term "first retail sale" means the first sale, for a purpose other than for resale or leasing in a long-term lease, after production, manufacture, or importation.
(2) Leases considered as sales
Rules similar to the rules of section 4217 shall apply.
(3) Use treated as sale
(A) In general
If any person uses an article taxable under section 4051 before the first retail sale of such article, then such person shall be liable for tax under section 4051 in the same manner as if such article were sold at retail by him.
(B) Exemption for use in further manufacture
Subparagraph (A) shall not apply to use of an article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by him.
(C) Computation of tax
In the case of any person made liable for tax by subparagraph (A), the tax shall be computed on the price at which similar articles are sold at retail in the ordinary course of trade, as determined by the Secretary.
(b) Determination of price
(1) In general
In determining price for purposes of this subchapter—
(A) there shall be included any charge incident to placing the article in condition ready for use,
(B) there shall be excluded—
(i) the amount of the tax imposed by this subchapter,
(ii) if stated as a separate charge, the amount of any retail sales tax imposed by any State or political subdivision thereof or the District of Columbia, whether the liability for such tax is imposed on the vendor or vendee, and
(iii) the value of any component of such article if—
(I) such component is furnished by the first user of such article, and
(II) such component has been used before such furnishing, and
(C) the price shall be determined without regard to any trade-in.
(2) Sales not at arm's length
In the case of any article sold (otherwise than through an arm's-length transaction) at less than the fair market price, the tax under this subchapter shall be computed on the price for which similar articles are sold at retail in the ordinary course of trade, as determined by the Secretary.
(3) Long-term lease
(A) In general
In the case of any long-term lease of an article which is treated as the first retail sale of such article, the tax under this subchapter shall be computed on a price equal to—
(i) the sum of—
(I) the price (determined under this subchapter but without regard to paragraph (4)) at which such article was sold to the lessor, and
(II) the cost of any parts and accessories installed by the lessor on such article before the first use by the lessee or leased in connection with such long-term lease, plus
(ii) an amount equal to the presumed markup percentage of the sum described in clause (i).
(B) Presumed markup percentage
For purposes of subparagraph (A), the term "presumed markup percentage" means the average markup percentage of retailers of articles of the type involved, as determined by the Secretary.
(C) Exceptions under regulations
To the extent provided in regulations prescribed by the Secretary, subparagraph (A) shall not apply to specified types of leases where its application is not necessary to carry out the purposes of this subsection.
(4) Special rule where tax paid by manufacturer, producer, or importer
(A) In general
In any case where the manufacturer, producer, or importer of any article (or a related person) is liable for tax imposed by this subchapter with respect to such article, the tax under this subchapter shall be computed on a price equal to the sum of—
(i) the price which would (but for this paragraph) be determined under this subchapter, plus
(ii) the product of the price referred to in clause (i) and the presumed markup percentage determined under paragraph (3)(B).
(B) Related person
For purposes of this paragraph—
(i) In general
Except as provided in clause (ii), the term "related person" means any person who is a member of the same controlled group (within the meaning of section 5061(e)(3)) as the manufacturer, producer, or importer.
(ii) Exception for retail establishment
To the extent provided in regulations prescribed by the Secretary, a person shall not be treated as a related person with respect to the sale of any article if such article is sold through a permanent retail establishment in the normal course of the trade or business of being a retailer.
(c) Certain combinations not treated as manufacture
(1) In general
For purposes of this subchapter (other than subsection (a)(3)(B)), a person shall not be treated as engaged in the manufacture of any article by reason of merely combining such article with any item listed in paragraph (2).
(2) Items
The items listed in this paragraph are any coupling device (including any fifth wheel), wrecker crane, loading and unloading equipment (including any crane, hoist, winch, or power liftgate), aerial ladder or tower, snow and ice control equipment, earthmoving, excavation and construction equipment, spreader, sleeper cab, cab shield, or wood or metal floor.
(d) Certain other rules made applicable
Under regulations prescribed by the Secretary, rules similar to the rules of subsections (c) and (d) of section 4216 (relating to partial payments) shall apply for purposes of this subchapter.
(e) Long-term lease
For purposes of this section, the term "long-term lease" means any lease with a term of 1 year or more. In determining a lease term for purposes of the preceding sentence, the rules of section 168(i)(3)(A) shall apply.
(f) Certain repairs and modifications not treated as manufacture
(1) In general
An article described in section 4051(a)(1) shall not be treated as manufactured or produced solely by reason of repairs or modifications to the article (including any modification which changes the transportation function of the article or restores a wrecked article to a functional condition) if the cost of such repairs and modifications does not exceed 75 percent of the retail price of a comparable new article.
(2) Exception
Paragraph (1) shall not apply if the article (as repaired or modified) would, if new, be taxable under section 4051 and the article when new was not taxable under such section or the corresponding provision of prior law.
(g) Regulations
The Secretary shall prescribe regulations which permit, in lieu of any other certification, persons who are purchasing articles taxable under this subchapter for resale or leasing in a long-term lease to execute a statement (made under penalties of perjury) on the sale invoice that such sale is for resale. The Secretary shall not impose any registration requirement as a condition of using such procedure.
(Added
Editorial Notes
Prior Provisions
A prior section 4052, act Aug. 16, 1954, ch. 736,
Amendments
1998—Subsec. (f)(2).
1997—Subsec. (b)(1)(B)(ii) to (iv).
Subsec. (d).
"(1) subsections (c) and (d) of section 4216 (relating to partial payments), and
"(2) section 4222 (relating to registration),
shall apply".
Subsec. (e).
Subsec. (f).
Subsec. (g).
1988—Subsec. (a)(1).
1987—Subsec. (a)(1).
Subsec. (b)(3).
Subsec. (b)(4).
Subsec. (f).
1984—Subsec. (b)(1)(B)(iv).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by section 1402(b) of
Effective Date of 1988 Amendment
Effective Date of 1987 Amendment
Effective Date of 1984 Amendment
Amendment by
§4053. Exemptions
No tax shall be imposed by section 4051 on any of the following articles:
(1) Camper coaches bodies for self-propelled mobile homes
Any article designed—
(A) to be mounted or placed on automobile trucks, automobile truck chassis, or automobile chassis, and
(B) to be used primarily as living quarters or camping accommodations.
(2) Feed, seed, and fertilizer equipment
Any body primarily designed—
(A) to process or prepare seed, feed, or fertilizer for use on farms,
(B) to haul feed, seed, or fertilizer to and on farms,
(C) to spread feed, seed, or fertilizer on farms,
(D) to load or unload feed, seed, or fertilizer on farms, or
(E) for any combination of the foregoing.
(3) House trailers
Any house trailer.
(4) Ambulances, hearses, etc.
Any ambulance, hearse, or combination ambulance-hearse.
(5) Concrete mixers
Any article designed—
(A) to be placed or mounted on an automobile truck chassis or truck trailer or semitrailer chassis, and
(B) to be used to process or prepare concrete.
(6) Trash containers, etc.
Any box, container, receptacle, bin or other similar article—
(A) which is designed to be used as a trash container and is not designed for the transportation of freight other than trash, and
(B) which is not designed to be permanently mounted on or permanently affixed to an automobile truck chassis or body.
(7) Rail trailers and rail vans
Any chassis or body of a trailer or semitrailer which is designed for use both as a highway vehicle and a railroad car. For purposes of the preceding sentence, piggy-back trailer or semitrailer shall not be treated as designed for use as a railroad car.
(8) Mobile machinery
Any vehicle which consists of a chassis—
(A) to which there has been permanently mounted (by welding, bolting, riveting, or other means) machinery or equipment to perform a construction, manufacturing, processing, farming, mining, drilling, timbering, or similar operation if the operation of the machinery or equipment is unrelated to transportation on or off the public highways,
(B) which has been specially designed to serve only as a mobile carriage and mount (and a power source, where applicable) for the particular machinery or equipment involved, whether or not such machinery or equipment is in operation, and
(C) which, by reason of such special design, could not, without substantial structural modification, be used as a component of a vehicle designed to perform a function of transporting any load other than that particular machinery or equipment or similar machinery or equipment requiring such a specially designed chassis.
(9) Idling reduction device
Any device or system of devices which—
(A) is designed to provide to a vehicle those services (such as heat, air conditioning, or electricity) that would otherwise require the operation of the main drive engine while the vehicle is temporarily parked or remains stationary using one or more devices affixed to a tractor, and
(B) is determined by the Administrator of the Environmental Protection Agency, in consultation with the Secretary of Energy and the Secretary of Transportation, to reduce idling of such vehicle at a motor vehicle rest stop or other location where such vehicles are temporarily parked or remain stationary.
(10) Advanced insulation
Any insulation that has an R value of not less than R35 per inch.
(Added
Editorial Notes
Prior Provisions
A prior section 4053, acts Aug. 16, 1954, ch. 736,
For provisions of prior
Amendments
2008—Pars. (9), (10).
2004—Par. (8).
1984—
Statutory Notes and Related Subsidiaries
Effective Date of 2008 Amendment
Effective Date of 2004 Amendment
Effective Date of 1984 Amendment
Amendment by
CHAPTER 32 —MANUFACTURERS EXCISE TAXES
Editorial Notes
Amendments
2019—
2010—
1987—
1978—
1965—
1 Section numbers editorially supplied.
Subchapter A—Automotive and Related Items
Editorial Notes
Amendments
1984—
PART I—GAS GUZZLERS
Editorial Notes
Amendments
1986—
1984—
1978—
1971—
[§§4061 to 4063. Repealed. Pub. L. 98–369, div. A, title VII, §735(a)(1), July 18, 1984, 98 Stat. 980 ]
Section 4061, acts Aug. 16, 1954, ch. 736,
Section 4062, acts Aug. 16, 1954, ch. 736,
Section 4063, acts Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective as if included in the provisions of the Highway Revenue Act of 1982,
§4064. Gas guzzler tax
(a) Imposition of tax
There is hereby imposed on the sale by the manufacturer of each automobile a tax determined in accordance with the following table:
| If the fuel economy of the model type in which the automobile falls is: | The tax is: |
|---|---|
| At least 22.5 | $0 |
| At least 21.5 but less than 22.5 | 1,000 |
| At least 20.5 but less than 21.5 | 1,300 |
| At least 19.5 but less than 20.5 | 1,700 |
| At least 18.5 but less than 19.5 | 2,100 |
| At least 17.5 but less than 18.5 | 2,600 |
| At least 16.5 but less than 17.5 | 3,000 |
| At least 15.5 but less than 16.5 | 3,700 |
| At least 14.5 but less than 15.5 | 4,500 |
| At least 13.5 but less than 14.5 | 5,400 |
| At least 12.5 but less than 13.5 | 6,400 |
| Less than 12.5 | 7,700. |
(b) Definitions
For purposes of this section—
(1) Automobile
(A) In general
The term "automobile" means any 4-wheeled vehicle propelled by fuel—
(i) which is manufactured primarily for use on public streets, roads, and highways (except any vehicle operated exclusively on a rail or rails), and
(ii) which is rated at 6,000 pounds unloaded gross vehicle weight or less.
(B) Exception for certain vehicles
The term "automobile" does not include any vehicle which is treated as a nonpassenger automobile under the rules which were prescribed by the Secretary of Transportation for purposes of
(C) Exception for emergency vehicles
The term "automobile" does not include any vehicle sold for use and used—
(i) as an ambulance or combination ambulance-hearse,
(ii) by the United States or by a State or local government for police or other law enforcement purposes, or
(iii) for other emergency uses prescribed by the Secretary by regulations.
(2) Fuel economy
The term "fuel economy" means the average number of miles traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed, as determined by the EPA Administrator in accordance with procedures established under subsection (c).
(3) Model type
The term "model type" means a particular class of automobile as determined by regulation by the EPA Administrator.
(4) Model year
The term "model year", with reference to any specific calendar year, means a manufacturer's annual production period (as determined by the EPA Administrator) which includes January 1 of such calendar year. If a manufacturer has no annual production period, the term "model year" means the calendar year.
(5) Manufacturer
(A) In general
The term "manufacturer" includes a producer or importer.
(B) Lengthening treated as manufacture
For purposes of this section, subchapter G of this chapter, and section 6416(b)(3), the lengthening of an automobile by any person shall be treated as the manufacture of an automobile by such person.
(6) EPA Administrator
The term "EPA Administrator" means the Administrator of the Environmental Protection Agency.
(7) Fuel
The term "fuel" means gasoline and diesel fuel. The Secretary (after consultation with the Secretary of Transportation) may, by regulation, include any product of petroleum or natural gas within the meaning of such term if he determines that such inclusion is consistent with the need of the Nation to conserve energy.
(c) Determination of fuel economy
For purposes of this section—
(1) In general
Fuel economy for any model type shall be measured in accordance with testing and calculation procedures established by the EPA Administrator by regulation. Procedures so established shall be the procedures utilized by the EPA Administrator for model year 1975 (weighted 55 percent urban cycle, and 45 percent highway cycle), or procedures which yield comparable results. Procedures under this subsection, to the extent practicable, shall require that fuel economy tests be conducted in conjunction with emissions tests conducted under section 206 of the Clean Air Act. The EPA Administrator shall report any measurements of fuel economy to the Secretary.
(2) Special rule for fuels other than gasoline
The EPA Administrator shall by regulation determine that quantity of any other fuel which is the equivalent of one gallon of gasoline.
(3) Time by which regulations must be issued
Testing and calculation procedures applicable to a model year, and any amendment to such procedures (other than a technical or clerical amendment), shall be promulgated not less than 12 months before the model year to which such procedures apply.
(Added
Editorial Notes
References in Text
The date of enactment of this section, referred to in subsec. (b)(1)(B), is Nov. 9, 1978.
Section 206 of the Clean Air Act, referred to in subsec. (c)(1), is section 206 of act July 14, 1955, ch. 360, title II, as added Dec. 31, 1970,
Amendments
2005—Subsec. (b)(1)(A).
1994—Subsec. (b)(1)(B).
1990—Subsec. (a).
Subsec. (b)(1)(A).
Subsec. (b)(5)(B).
"(i) such person would (but for this subparagraph) be so treated solely by reason of lengthening an existing automobile, and
"(ii) such person is a small manufacturer (as defined in subsection (d)(4)) for the model year in which such lengthening occurs."
Subsec. (d).
1986—Subsec. (b)(1)(A)(ii).
Subsec. (b)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Effective Date of 1990 Amendment
"(1)
"(2)
"(3)
Effective Date of 1986 Amendment
"(I) such station wagon is originally equipped with more than 6 seat belts,
"(II) such station wagon was manufactured before November 1, 1985, and
"(III) such station wagon is of the 1985 or 1986 model year."
Effective Date
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
PART II—TIRES
Editorial Notes
Amendments
2004—
1984—
1956—Act June 29, 1956, ch. 462, title II, §204(d),
§4071. Imposition of tax
(a) Imposition and rate of tax
There is hereby imposed on taxable tires sold by the manufacturer, producer, or importer thereof a tax at the rate of 9.45 cents (4.725 cents in the case of a biasply tire or super single tire) for each 10 pounds so much of the maximum rated load capacity thereof as exceeds 3,500 pounds.
(b) Special rule for manufacturers who sell at retail
Under regulations prescribed by the Secretary, if the manufacturer, producer, or importer of any tire delivers such tire to a retail store or retail outlet of such manufacturer, producer, or importer, he shall be liable for tax under subsection (a) in respect of such tire in the same manner as if it had been sold at the time it was delivered to such retail store or outlet. This subsection shall not apply to an article in respect to which tax has been imposed by subsection (a). Subsection (a) shall not apply to an article in respect of which tax has been imposed by this subsection.
(c) Tires on imported articles
For the purposes of subsection (a), if an article imported into the United States is equipped with tires—
(1) the importer of the article shall be treated as the importer of the tires with which such article is equipped, and
(2) the sale of the article by the importer thereof shall be treated as the sale of the tires with which such article is equipped.
This subsection shall not apply with respect to the sale of an automobile bus chassis or an automobile bus body.
(d) Termination
On and after October 1, 2028, the taxes imposed by subsection (a) shall not apply.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2021—Subsec. (d).
2015—Subsec. (d).
2012—Subsec. (d).
2011—Subsec. (d).
2005—Subsec. (d).
2004—Subsec. (a).
Subsec. (c).
Subsec. (e).
1998—Subsec. (d).
1991—Subsec. (d).
1990—Subsec. (d).
1987—Subsec. (d).
1984—Subsec. (b).
Subsec. (c).
Subsec. (e).
Subsec. (f).
1983—Subsec. (a).
"(1) Tires of the type used on highway vehicles, 9.75 cents a pound.
"(2) Other tires (other than laminated tires to which paragraph (5) applies), 4.875 cents a pound.
"(3) Inner tubes, for tires, 10 cents a pound.
"(4) Tread rubber, 5 cents a pound.
"(5) Laminated tires (not of the type used on highway vehicles) which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent, 1 cent a pound."
Subsec. (d).
1980—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (d)(1).
Subsec. (e).
Subsec. (f).
1978—Subsec. (d).
1976—Subsecs. (b), (c).
Subsec. (d).
1971—Subsec. (e).
1970—Subsec. (d).
1966—Subsecs. (b) to (d).
1961—Subsec. (a)(1).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (c).
1960—Subsec. (a)(2).
Subsec. (a)(5).
1956—Act June 29, 1956, increased tax on tires of type used on highway vehicles from 5 cents a pound to 8 cents a pound, provided for a tax of 3 cents a pound on tread rubber, and required on and after July 1, 1972, a reduction in tax on tires of type used on highway vehicles from 8 cents a pound to 5 cents a pound, and elimination of tax on tread rubber.
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2004 Amendment
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Effective Date of 1980 Amendments
Amendment by
Effective Date of 1971 Amendment
"(1) Except as otherwise provided in this section, the amendments made by subsections (a), (f), and (g) [amending this section and
"(2) For purposes of paragraph (1), an article shall not be considered sold before the day after the date of the enactment of this Act [Dec. 10, 1971] unless possession or right to possession passes to the purchaser before such day.
"(3) In the case of—
"(A) a lease,
"(B) a contract for the sale of an article where it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,
"(C) a conditional sale, or
"(D) a chattel mortgage arrangement wherein it is provided that the sale price shall be paid in installments,
entered into on or before the date of the enactment of this Act [Dec. 10, 1971], payments made after such date, with respect to the article leased or sold shall, for purposes of this subsection, be considered as payments made with respect to an article sold after such date, if the lessor or vendor establishes that the amount of payments payable after such date with respect to such article has been reduced by an amount equal to that portion of the tax applicable with respect to the lease or sale of such article which is due and payable after such date. If the lessor or vendor does not establish that the payments have been so reduced, they shall be treated as payments made in respect of an article sold before the day after the date of the enactment of this Act."
Effective Date of 1966 Amendment
Effective Date of 1961 Amendment
Amendment by
Effective Date of 1960 Amendment
Effective Date of 1956 Amendment
Amendment by act June 29, 1956, effective July 1, 1956, see section 211 of act June 29, 1956, set out as a note under
Allowance of Credit or Refund of Overpayment of Tax Imposed
§4072. Definitions
(a) Taxable tire
For purposes of this chapter, the term "taxable tire" means any tire of the type used on highway vehicles if wholly or in part made of rubber and if marked pursuant to Federal regulations for highway use.
(b) Rubber
For purposes of this chapter, the term "rubber" includes synthetic and substitute rubber.
(c) Tires of the type used on highway vehicles
For purposes of this part, the term "tires of the type used on highway vehicles" means tires of the type used on—
(1) motor vehicles which are highway vehicles, or
(2) vehicles of the type used in connection with motor vehicles which are highway vehicles.
Such term shall not include tires of a type used exclusively on vehicles described in section 4053(8).
(d) Biasply
For purposes of this part, the term "biasply tire" means a pneumatic tire on which the ply cords that extend to the beads are laid at alternate angles substantially less than 90 degrees to the centerline of the tread.
(e) Super single tire
For purposes of this part, the term "super single tire" means a single tire greater than 13 inches in cross section width designed to replace 2 tires in a dual fitment. Such term shall not include any tire designed for steering.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2005—Subsec. (e).
2004—Subsec. (a).
Subsec. (b).
Subsecs. (c), (d).
Subsec. (e).
1984—Subsecs. (b), (c).
1956—Act June 29, 1956, substituted "Definitions" for "Definition of rubber" in section catchline.
Act June 29, 1956, designated existing provisions as subsec. (a) and added subsecs. (b) and (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Amendment by section 869(b) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1956 Amendment
Amendment by act June 29, 1956, effective July 1, 1956, see section 211 of act June 29, 1956, set out as a note under
§4073. Exemptions
The tax imposed by section 4071 shall not apply to tires sold for the exclusive use of the Department of Defense or the Coast Guard.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2004—
1984—
1976—Subsec. (c).
1956—Subsec. (c). Act June 29, 1956, added subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1956 Amendment
Amendment by act June 29, 1956, effective July 1, 1956, see section 211 of act June 29, 1956, set out as a note under
PART III—PETROLEUM PRODUCTS
Editorial Notes
Amendments
2004—
1993—
1987—
1983—
Subpart A—Motor and Aviation Fuels
Editorial Notes
Amendments
2004—
1997—
1993—
1986—
1956—Act June 29, 1956, ch. 462, title II, §208(e)(2),
Act Apr. 2, 1956, ch. 160, §4(a)(2),
§4081. Imposition of tax
(a) Tax imposed
(1) Tax on removal, entry, or sale
(A) In general
There is hereby imposed a tax at the rate specified in paragraph (2) on—
(i) the removal of a taxable fuel from any refinery,
(ii) the removal of a taxable fuel from any terminal,
(iii) the entry into the United States of any taxable fuel for consumption, use, or warehousing, and
(iv) the sale of a taxable fuel to any person who is not registered under section 4101 unless there was a prior taxable removal or entry of such fuel under clause (i), (ii), or (iii).
(B) Exemption for bulk transfers to registered terminals or refineries
(i) In general
The tax imposed by this paragraph shall not apply to any removal or entry of a taxable fuel transferred in bulk by pipeline or vessel to a terminal or refinery if the person removing or entering the taxable fuel, the operator of such pipeline or vessel (except as provided in clause (ii)), and the operator of such terminal or refinery are registered under section 4101.
(ii) Nonapplication of registration to vessel operators entering by deep-draft vessel
For purposes of clause (i), a vessel operator is not required to be registered with respect to the entry of a taxable fuel transferred in bulk by a vessel described in section 4042(c)(1).
(2) Rates of tax
(A) In general
The rate of the tax imposed by this section is—
(i) in the case of gasoline other than aviation gasoline, 18.3 cents per gallon,
(ii) in the case of aviation gasoline, 19.3 cents per gallon, and
(iii) in the case of diesel fuel or kerosene, 24.3 cents per gallon.
(B) Leaking Underground Storage Tank Trust Fund tax
The rates of tax specified in subparagraph (A) shall each be increased by 0.1 cent per gallon. The increase in tax under this subparagraph shall in this title be referred to as the Leaking Underground Storage Tank Trust Fund financing rate.
(C) Taxes imposed on fuel used in aviation
In the case of kerosene which is removed from any refinery or terminal directly into the fuel tank of an aircraft for use in aviation, the rate of tax under subparagraph (A)(iii) shall be—
(i) in the case of use for commercial aviation by a person registered for such use under section 4101, 4.3 cents per gallon, and
(ii) in the case of use for aviation not described in clause (i), 21.8 cents per gallon.
(D) Diesel-water fuel emulsion
In the case of diesel-water fuel emulsion at least 14 percent of which is water and with respect to which the emulsion additive is registered by a United States manufacturer with the Environmental Protection Agency pursuant to section 211 of the Clean Air Act (as in effect on March 31, 2003), subparagraph (A)(iii) shall be applied by substituting "19.7 cents" for "24.3 cents". The preceding sentence shall not apply to the removal, sale, or use of diesel-water fuel emulsion unless the person so removing, selling, or using such fuel is registered under section 4101.
(3) Certain refueler trucks, tankers, and tank wagons treated as terminal
(A) In general
For purposes of paragraph (2)(C), a refueler truck, tanker, or tank wagon shall be treated as part of a terminal if—
(i) such terminal is located within an airport,
(ii) any kerosene which is loaded in such truck, tanker, or wagon at such terminal is for delivery only into aircraft at the airport in which such terminal is located,
(iii) such truck, tanker, or wagon meets the requirements of subparagraph (B) with respect to such terminal, and
(iv) except in the case of exigent circumstances identified by the Secretary in regulations, no vehicle registered for highway use is loaded with kerosene at such terminal.
(B) Requirements
A refueler truck, tanker, or tank wagon meets the requirements of this subparagraph with respect to a terminal if such truck, tanker, or wagon—
(i) has storage tanks, hose, and coupling equipment designed and used for the purposes of fueling aircraft,
(ii) is not registered for highway use, and
(iii) is operated by—
(I) the terminal operator of such terminal, or
(II) a person that makes a daily accounting to such terminal operator of each delivery of fuel from such truck, tanker, or wagon.
(C) Reporting
The Secretary shall require under section 4101(d) reporting by such terminal operator of—
(i) any information obtained under subparagraph (B)(iii)(II), and
(ii) any similar information maintained by such terminal operator with respect to deliveries of fuel made by trucks, tankers, or wagons operated by such terminal operator.
(D) Applicable rate
For purposes of paragraph (2)(C), in the case of any kerosene treated as removed from a terminal by reason of this paragraph—
(i) the rate of tax specified in paragraph (2)(C)(i) in the case of use described in such paragraph shall apply if such terminal is located within a secured area of an airport, and
(ii) the rate of tax specified in paragraph (2)(C)(ii) shall apply in all other cases.
(4) Liability for tax on kerosene used in commercial aviation
For purposes of paragraph (2)(C)(i), the person who uses the fuel for commercial aviation shall pay the tax imposed under such paragraph. For purposes of the preceding sentence, fuel shall be treated as used when such fuel is removed into the fuel tank.
(b) Treatment of removal or subsequent sale by blender
(1) In general
There is hereby imposed a tax at the rate determined under subsection (a) on taxable fuel removed or sold by the blender thereof.
(2) Credit for tax previously paid
If—
(A) tax is imposed on the removal or sale of a taxable fuel by reason of paragraph (1), and
(B) the blender establishes the amount of the tax paid with respect to such fuel by reason of subsection (a),
the amount of the tax so paid shall be allowed as a credit against the tax imposed by reason of paragraph (1).
(c) Later separation of fuel from diesel-water fuel emulsion
If any person separates the taxable fuel from a diesel-water fuel emulsion on which tax was imposed under subsection (a) at a rate determined under subsection (a)(2)(D) (or with respect to which a credit or payment was allowed or made by reason of section 6427), such person shall be treated as the refiner of such taxable fuel. The amount of tax imposed on any removal of such fuel by such person shall be reduced by the amount of tax imposed (and not credited or refunded) on any prior removal or entry of such fuel.
(d) Termination
(1) In general
The rates of tax specified in clauses (i) and (iii) of subsection (a)(2)(A) shall be 4.3 cents per gallon after September 30, 2028.
(2) Aviation fuels
The rates of tax specified in subsection (a)(2)(A)(ii) and (a)(2)(C)(ii) shall be 4.3 cents per gallon—
(A) after December 31, 1996, and before the date which is 7 days after the date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, and
(B) after May 10, 2024.
(3) Leaking Underground Storage Tank Trust Fund financing rate
The Leaking Underground Storage Tank Trust Fund financing rate under subsection (a)(2) shall apply after September 30, 1997, and before October 1, 2028.
(e) Refunds in certain cases
Under regulations prescribed by the Secretary, if any person who paid the tax imposed by this section with respect to any taxable fuel establishes to the satisfaction of the Secretary that a prior tax was paid (and not credited or refunded) with respect to such taxable fuel, then an amount equal to the tax paid by such person shall be allowed as a refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by this section.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
Section 211 of the Clean Air Act, referred to in subsec. (a)(2)(D), is classified to
The date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, referred to in subsec. (d)(2)(A), is the date of enactment of
Amendments
2024—Subsec. (d)(2)(B).
2023—Subsec. (d)(2)(B).
2021—Subsec. (d)(1).
Subsec. (d)(3).
2018—Subsec. (d)(2)(B).
2017—Subsec. (d)(2)(B).
2016—Subsec. (d)(2)(B).
2015—Subsec. (d)(1).
Subsec. (d)(2)(B).
Subsec. (d)(3).
2012—Subsec. (d)(1).
Subsec. (d)(2)(B).
Subsec. (d)(3).
2011—Subsec. (d)(1).
Subsec. (d)(2)(B).
Subsec. (d)(3).
2010—Subsec. (d)(2)(B).
2009—Subsec. (d)(2)(B).
2008—Subsec. (d)(2)(B).
2007—Subsec. (d)(2)(B).
2005—Subsec. (a)(1)(B).
Subsec. (a)(2)(A)(ii) to (iv).
Subsec. (a)(2)(C).
Subsec. (a)(2)(D).
Subsec. (a)(3)(A)(i).
Subsec. (a)(3)(A)(ii), (iv).
Subsec. (a)(3)(D).
Subsec. (a)(4).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3).
2004—Subsec. (a)(1)(B).
Subsec. (a)(2)(A)(iv).
Subsec. (a)(2)(C).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (c).
1998—Subsec. (c)(4)(A).
"(i) 5.4 cents per gallon for 10 percent gasohol,
"(ii) 4.158 cents per gallon for 7.7 percent gasohol, and
"(iii) 3.078 cents per gallon for 5.7 percent gasohol.
In the case of a mixture none of the alcohol in which consists of ethanol, clauses (i), (ii), and (iii) shall be applied by substituting '6 cents' for '5.4 cents', '4.62 cents' for '4.158 cents', and '3.42 cents' for '3.078 cents'."
Subsec. (c)(5).
Subsec. (c)(8).
Subsec. (d)(1).
1997—Subsec. (a)(2)(A)(iii).
Subsec. (d)(1), (2).
"(1)
"(2)
Subsec. (d)(2)(B).
Subsec. (d)(3).
1996—Subsec. (a)(2)(A).
Subsec. (d)(1).
Subsec. (d)(2), (3).
1993—
Subsec. (a)(2)(B)(iii).
1992—Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(4).
1991—Subsec. (d)(1).
1990—Subsec. (a)(1).
"(A) the removal, or
"(B) the sale,
of gasoline by the refiner or importer thereof or the terminal operator."
Subsec. (a)(2)(A)(iii).
Subsec. (a)(2)(B)(i).
Subsec. (a)(2)(B)(iii).
Subsec. (a)(3).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(4).
Subsec. (c)(5).
Subsec. (d)(1).
Subsec. (d)(2).
"(A)
"(i) December 31, 1991, or
"(ii) the last day of the termination month.
"(B)
"(C)
Subsec. (d)(3).
Subsec. (e).
1988—Subsec. (a).
Subsec. (b)(1).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d).
Subsec. (d)(1).
Subsec. (d)(2)(A).
Subsec. (e).
1987—Subsec. (c)(4).
Subsec. (e)(1).
Subsec. (e)(2)(B).
1986—
Subsec. (a).
Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d).
Subsec. (e).
1984—Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(3).
1983—Subsec. (a).
Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(2).
1980—Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(4).
1978—Subsec. (b).
Subsec. (c).
1976—Subsec. (b).
1970—Subsec. (b).
1961—Subsec. (a).
Subsec. (b).
Subsec. (c).
1959—Subsec. (c).
1956—Act Mar. 29, 1956, substituted "April 1, 1957" for "April 1, 1956".
Subsec. (a). Act June 29, 1956, redesignated first sentence as subsec. (a) and increased tax from 2 to 3 cents a gallon.
Subsec. (b). Act June 29, 1956, redesignated second sentence as subsec. (b) and substituted "July 1, 1972" for "April 1, 1956".
1955—Act Mar. 30, 1955, substituted "April 1, 1956" for "April 1, 1955".
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by section 142(a)(1)(C), (2)(D) of
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
Effective Date of 2005 Amendments
Amendment by section 11161(a)(1)–(4)(D) of
Amendment by section 1362(a) of
Effective Date of 2004 Amendment
Amendment by section 301(c)(7) of
Amendment by section 853(a)(1)–(3)(A), (4) of
Effective Date of 1998 Amendment
Amendment by section 9003(b)(2)(B), (C), of
Effective Date of 1997 Amendments
Amendment by section 1031(a)(2) of
Amendment by section 1032(b) of
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by section 13241(a) of
Amendment by section 13242(a) of
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
Amendment by section 11211(a)(1)–(3), (5)(A)–(C) of
"(1)
"(2)
Effective Date of 1988 Amendment
Amendment by section 1017(c)(1), (14) of
Amendment by section 2001(d)(5) of
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendments
Amendment by
Effective Date of 1984 Amendment
Amendment by section 732(a)(1), (2) of
Amendment by section 912(b), (f) of
Effective Date of 1983 Amendment
Amendment by section 511(a)(1), (d)(1) of
Effective Date of 1980 Amendment
Amendment by section 232(b)(3)(A) of
Effective Date of 1978 Amendment
Effective Date of 1961 Amendment
Amendment by
Effective Date of 1956 Amendment
Amendment by act June 29, 1956, effective July 1, 1956, see section 211 of act June 29, 1956, set out as a note under
List of Airports With Secured Terminals
Delayed Deposits of Highway Motor Fuel Tax Revenues
Due date for deposit of taxes imposed by this section which would be required to be made after July 31, 1998, and before Oct. 1, 1998, to be Oct. 5, 1998, see section 901(e) of
Delayed Deposits of Airport Trust Fund Tax Revenues
Due date for deposit of taxes imposed by subsec. (a)(2)(A)(ii) of this section which would be required to be made after July 31, 1998, and before Oct. 1, 1998, to be Oct. 5, 1998, see section 1031(g) of
Motor Fuel Tax Enforcement Advisory Commission
"(a)
"(b)
"(1) review motor fuel revenue collections, historical and current;
"(2) review the progress of investigations with respect to motor fuel taxes;
"(3) develop and review legislative proposals with respect to motor fuel taxes;
"(4) monitor the progress of administrative regulation projects relating to motor fuel taxes;
"(5) review the results of Federal and State agency cooperative efforts regarding motor fuel taxes;
"(6) review the results of Federal interagency cooperative efforts regarding motor fuel taxes; and
"(7) evaluate and make recommendations to the President and Congress regarding—
"(A) the effectiveness of existing Federal enforcement programs regarding motor fuel taxes,
"(B) enforcement personnel allocation, and
"(C) proposals for regulatory projects, legislation, and funding.
"(c)
"(1)
"(A) At least one representative from each of the following Federal entities: the Department of Homeland Security, the Department of Transportation—Office of Inspector General, the Federal Highway Administration, the Department of Defense, and the Department of Justice.
"(B) At least one representative from the Federation of State Tax Administrators.
"(C) At least one representative from any State department of transportation.
"(D) Two representatives from the highway construction industry.
"(E) Six representatives from industries relating to fuel distribution—refiners (two representatives), distributors (one representative), pipelines (one representative), and terminal operators (two representatives).
"(F) One representative from the retail fuel industry.
"(G) Two representatives from the staff of the Committee on Finance of the Senate and two representatives from the staff of the Committee on Ways and Means of the House of Representatives.
"(2)
"(3)
"(4)
"(5)
"(d)
"(e)
"(f)
"(g)
Floor Stocks Taxes
"(1)
"(A) the tax which would have been imposed before such date on such kerosene had the amendments made by this section [amending this section and
"(B) the sum of—
"(i) the tax imposed before such date on such kerosene under section 4091 of the Internal Revenue Code of 1986, as in effect on such date, and
"(ii) in the case of kerosene held exclusively for such person's own use, the amount which such person would (but for this clause) reasonably expect (as of such date) to be paid as a refund under section 6427(l) of such Code with respect to such kerosene.
"(2)
"(3)
"(A)
"(B)
"(4)
"(A) in any case in which tax was not imposed by section 4091 of such Code, at the Leaking Underground Storage Tank Trust Fund financing rate under such section to the extent of 0.1 cents per gallon, and
"(B) at the rate under section 4081(a)(2)(A)(iv) of such Code to the extent of the remainder.
"(5)
"(6)
"(1)
"(2)
"(A)
"(B)
"(C)
"(3)
"(A)
"(B)
"(4)
"(5)
"(6)
"(A)
"(B)
"(C)
"(i)
"(I)
"(II)
"(ii)
"(7)
"(8)
"(1)
"(A) 15 cents per gallon in the case of aviation gasoline, and
"(B) 17.5 cents per gallon in the case of aviation fuel.
"(2)
"(A)
"(B)
"(C)
"(3)
"(A)
"(B)
"(C)
"(D)
"(E)
"(F)
"(4)
"(A) aviation liquid held by any person on the tax effective date exclusively for any use for which a credit or refund of the entire tax imposed by section 4081 or 4091 of such Code (as the case may be) is allowable for such liquid purchased on or after such tax effective date for such use, or
"(B) aviation fuel held by any person on the tax effective date exclusively for any use described in section 4092(b) of such Code.
"(5)
"(A)
"(B)
"(C)
"(i)
"(I)
"(II)
"(ii)
"(6)
"(1)
"(2)
"(A)
"(B)
"(C)
"(3)
"(A)
"(B)
"(C)
"(D)
"(E)
"(4)
"(5)
"(6)
"(A)
"(i) on gasoline held on October 1, 1993, by any person if the aggregate amount of gasoline held by such person on such date does not exceed 4,000 gallons, and
"(ii) on diesel fuel or aviation fuel held on October 1, 1993, by any person if the aggregate amount of diesel fuel or aviation fuel held by such person on such date does not exceed 2,000 gallons.
The preceding sentence shall apply only if such person submits to the Secretary (at the time and in the manner required by the Secretary) such information as the Secretary shall require for purposes of this paragraph.
"(B)
"(C)
"(i)
"(I)
"(II)
"(ii)
"(7)
"(a)
"(1) no tax was imposed on such fuel under section 4041(a) or 4091 of the Internal Revenue Code of 1986 as in effect on December 31, 1993, and
"(2) tax would have been imposed by section 4081 of such Code, as amended by this Act, on any prior removal, entry, or sale of such fuel had such section 4081 applied to such fuel for periods before January 1, 1994.
"(b)
"(c)
"(1)
"(2)
"(3)
"(d)
"(1)
"(2)
"(e)
"(1)
"(2)
"(f)
Study of Evasion of Gasoline Tax
Extension of Payment Due Date for Certain Fuel Taxes
"(a) 14-
"(b)
"(1)
"(A) any person other than any person whose average daily production of crude oil for the preceding calendar quarter exceeds 1,000 barrels, and
"(B) any independent refiner (within the meaning of section 4995(b)(4) of such Code).
"(2)
"(c)
Study by Secretary of the Treasury; Report to Congress
Study respecting portion of taxes imposed by this section is attributable to fuel used in recreational motorboats and report to Congress no later than 2 years after Oct. 14, 1980, see
Expedition of Certain Ethanol Production Applications
§4082. Exemptions for diesel fuel and kerosene
(a) In general
The tax imposed by section 4081 shall not apply to diesel fuel and kerosene—
(1) which the Secretary determines is destined for a nontaxable use,
(2) which is indelibly dyed by mechanical injection in accordance with regulations which the Secretary shall prescribe, and
(3) which meets such marking requirements (if any) as may be prescribed by the Secretary in regulations.
Such regulations shall allow an individual choice of dye color approved by the Secretary or chosen from any list of approved dye colors that the Secretary may publish.
(b) Nontaxable use
For purposes of this section, the term "nontaxable use" means—
(1) any use which is exempt from the tax imposed by section 4041(a)(1) other than by reason of a prior imposition of tax,
(2) any use in a train, and
(3) any use described in section 4041(a)(1)(C)(iii)(II).
The term "nontaxable use" does not include the use of kerosene in an aircraft and such term shall not include any use described in section 6421(e)(2)(C).
(c) Exception to dyeing requirements
Paragraph (2) of subsection (a) shall not apply with respect to any diesel fuel and kerosene—
(1) removed, entered, or sold in a State for ultimate sale or use in an area of such State during the period such area is exempted from the fuel dyeing requirements under subsection (i) of section 211 of the Clean Air Act (as in effect on the date of the enactment of this subsection) by the Administrator of the Environmental Protection Agency under paragraph (4) of such subsection (i) (as so in effect), and
(2) the use of which is certified pursuant to regulations issued by the Secretary.
(d) Additional exceptions to dyeing requirements for kerosene
(1) Use for non-fuel feedstock purposes
Subsection (a)(2) shall not apply to kerosene—
(A) received by pipeline or vessel for use by the person receiving the kerosene in the manufacture or production of any substance (other than gasoline, diesel fuel, or special fuels referred to in section 4041), or
(B) to the extent provided in regulations, removed or entered—
(i) for such a use by the person removing or entering the kerosene, or
(ii) for resale by such person for such a use by the purchaser,
but only if the person receiving, removing, or entering the kerosene and such purchaser (if any) are registered under section 4101 with respect to the tax imposed by section 4081.
(2) Wholesale distributors
To the extent provided in regulations, subsection (a)(2) shall not apply to kerosene received by a wholesale distributor of kerosene if such distributor—
(A) is registered under section 4101 with respect to the tax imposed by section 4081 on kerosene, and
(B) sells kerosene exclusively to ultimate vendors described in section 6427(l)(5)(B) with respect to kerosene.
(e) Kerosene removed into an aircraft
In the case of kerosene (other than kerosene with respect to which tax is imposed under section 4043) which is exempt from the tax imposed by section 4041(c) (other than by reason of a prior imposition of tax) and which is removed from any refinery or terminal directly into the fuel tank of an aircraft—
(1) the rate of tax under section 4081(a)(2)(A)(iii) shall be zero, and
(2) if such aircraft is employed in foreign trade or trade between the United States and any of its possessions, the increase in such rate under section 4081(a)(2)(B) shall be zero.
For purposes of this subsection, any removal described in section 4081(a)(3)(A) shall be treated as a removal from a terminal but only if such terminal is located within a secure area of an airport.
(f) Exception for Leaking Underground Storage Tank Trust Fund financing rate
(1) In general
Subsection (a) shall not apply to the tax imposed under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.
(2) Exception for export, etc.
Paragraph (1) shall not apply with respect to any fuel if the Secretary determines that such fuel is destined for export or for use by the purchaser as supplies for vessels (within the meaning of section 4221(d)(3)) employed in foreign trade or trade between the United States and any of its possessions.
(g) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out this section, including regulations requiring the conspicuous labeling of retail diesel fuel and kerosene pumps and other delivery facilities to assure that persons are aware of which fuel is available only for nontaxable uses.
(h) Cross reference
For tax on train and certain bus uses of fuel purchased tax-free, see subsections (a)(1) and (d)(3) of section 4041.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
Subsection (i) of section 211 of the Clean Air Act, referred to in subsec. (c)(1), is classified to
The date of the enactment of this subsection, referred to in subsec. (c)(1), is the date of enactment of
Amendments
2012—Subsec. (e).
2007—Subsec. (a).
Subsec. (b).
"(1) any use which is exempt from the tax imposed by section 4041(a)(1) other than by reason of a prior imposition of tax,
"(2) any use in a train, and
"(3) any use described in section 4041(a)(1)(C)(iii)(II).
The term 'nontaxable use' does not include the use of kerosene in an aircraft and such term shall not include any use described in section 6421(e)(2)(C)." See 2004 Amendment notes below.
Subsec. (e).
Subsecs. (f) to (h).
2006—Subsec. (d)(2)(B).
2005—Subsec. (a).
Subsec. (b).
Subsec. (d)(2)(B).
Subsec. (e).
2004—Subsec. (a)(2).
Subsec. (b).
Subsec. (b)(3).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Subsec. (g).
1998—Subsec. (d)(1).
Subsec. (d)(3).
1997—
Subsecs. (a), (c).
Subsec. (d).
Subsecs. (e), (f).
1996—Subsecs. (c) to (e).
1993—
"(a)
"(1) gasoline blend stocks, and
"(2) products commonly used as additives in gasoline.
For purposes of paragraph (1), the term 'gasoline blend stocks' means any petroleum product component of gasoline.
"(b)
1986—Subsec. (a).
Subsec. (b).
Subsecs. (c) to (e).
1984—Subsec. (d).
Subsec. (e).
1970—Subsec. (c).
1965—Subsec. (b).
Subsec. (d)(2).
1959—Subsec. (a).
Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2012 Amendment
Amendment by
Effective Date of 2007 Amendment
Amendments by section 6(d)(2)(B), (C)(i) of
Effective Date of 2006 Amendment
Amendment by
Effective Date of 2005 Amendments
Amendment by
Amendment by
Effective Date of 2004 Amendment
Amendment by section 241(a)(2)(B) of
Amendment by section 853(a)(5) of
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
Effective Date of 1959 Amendment
Regulations
§4083. Definitions; special rule; administrative authority
(a) Taxable fuel
For purposes of this subpart—
(1) In general
The term "taxable fuel" means—
(A) gasoline,
(B) diesel fuel, and
(C) kerosene.
(2) Gasoline
The term "gasoline"—
(A) includes any gasoline blend, other than qualified methanol or ethanol fuel (as defined in section 4041(b)(2)(B)), partially exempt methanol or ethanol fuel (as defined in section 4041(m)(2)), or a denatured alcohol, and
(B) includes, to the extent prescribed in regulations—
(i) any gasoline blend stock, and
(ii) any product commonly used as an additive in gasoline (other than alcohol).
For purposes of subparagraph (B)(i), the term "gasoline blend stock" means any petroleum product component of gasoline.
(3) Diesel fuel
(A) In general
The term "diesel fuel" means—
(i) any liquid (other than gasoline) which is suitable for use as a fuel in a diesel-powered highway vehicle, or a diesel-powered train,
(ii) transmix, and
(iii) diesel fuel blend stocks identified by the Secretary.
(B) Transmix
For purposes of subparagraph (A), the term "transmix" means a byproduct of refined products pipeline operations created by the mixing of different specification products during pipeline transportation.
(b) Commercial aviation
For purposes of this subpart, the term "commercial aviation" means any use of an aircraft in a business of transporting persons or property for compensation or hire by air, unless properly allocable to any transportation exempt from the taxes imposed by sections 4261 and 4271 by reason of section 4281 or 4282 or by reason of subsection (h) or (i) of section 4261. Such term shall not include the use of any aircraft before May 11, 2024, if tax is imposed under section 4043 with respect to the fuel consumed in such use or if no tax is imposed on such use under section 4043 by reason of subsection (c)(5) thereof.
(c) Certain uses defined as removal
If any person uses taxable fuel (other than in the production of taxable fuels or special fuels referred to in section 4041), such use shall for the purposes of this chapter be considered a removal.
(d) Administrative authority
(1) In general
In addition to the authority otherwise granted by this title, the Secretary may in administering compliance with this subpart, section 4041, and penalties and other administrative provisions related thereto—
(A) enter any place at which taxable fuel is produced or is stored (or may be stored) for purposes of—
(i) examining the equipment used to determine the amount or composition of such fuel and the equipment used to store such fuel,
(ii) taking and removing samples of such fuel, and
(iii) inspecting any books and records and any shipping papers pertaining to such fuel, and
(B) detain, for the purposes referred in subparagraph (A), any container which contains or may contain any taxable fuel.
(2) Inspection sites
The Secretary may establish inspection sites for purposes of carrying out the Secretary's authority under paragraph (1)(B).
(3) Penalty for refusal of entry
(A) Forfeiture
The penalty provided by section 7342 shall apply to any refusal to admit entry or other refusal to permit an action by the Secretary authorized by paragraph (1), except that section 7342 shall be applied by substituting "$1,000" for "$500" for each such refusal.
(B) Assessable penalty
For additional assessable penalty for the refusal to admit entry or other refusal to permit an action by the Secretary authorized by paragraph (1), see section 6717.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2024—Subsec. (b).
2023—Subsec. (b).
2018—Subsec. (b).
2017—Subsec. (b).
2016—Subsec. (b).
2015—Subsec. (b).
2012—Subsec. (b).
2005—Subsec. (b).
2004—Subsec. (a)(2).
Subsec. (a)(3).
Subsecs. (b), (c).
Subsec. (d).
Subsec. (d)(1)(A)(iii).
Subsec. (d)(3).
1998—Subsec. (a)(1).
1997—Subsec. (a)(1)(C).
Subsec. (a)(3).
Subsec. (b).
1993—
"(1) For provisions to relieve farmers from excise tax in the case of gasoline used on the farm for farming purposes, see section 6420.
"(2) For provisions to relieve purchasers of gasoline from excise tax in the case of gasoline used for certain nonhighway purposes, used by local transit systems, or sold for certain exempt purposes, see section 6421.
"(3) For provisions to relieve purchasers of gasoline from excise tax in the case of gasoline not used for taxable purposes, see section 6427."
1986—
1976—
Statutory Notes and Related Subsidiaries
Effective Date of 2012 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Amendment by section 301(c)(8) of
Amendment by section 853(b) of
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by section 902(b)(3) of
Amendment by section 1032(a), (e)(4) of
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
§4084. Cross references
(1) For provisions to relieve farmers from excise tax in the case of gasoline used on the farm for farming purposes, see section 6420.
(2) For provisions to relieve purchasers of gasoline from excise tax in the case of gasoline used for certain nonhighway purposes, used by local transit systems, or sold for certain exempt purposes, see section 6421.
(3) For provisions to relieve purchasers from excise tax in the case of taxable fuel not used for taxable purposes, see section 6427.
(Added
Editorial Notes
Prior Provisions
A prior section 4084, added Apr. 2, 1956, ch. 160, §4(a)(1),
A prior section 4091, added
Another prior section 4091, acts Aug. 16, 1954, ch. 736,
A prior section 4092, added
Another prior section 4092, acts Aug. 16, 1954, ch. 736,
A prior section 4093, added
Another prior section 4093, acts Aug. 16, 1954, ch. 736,
A prior section 4094, added
Statutory Notes and Related Subsidiaries
Effective Date
Section effective Jan. 1, 1994, see section 13242(e) of
Subpart B—Special Provisions Applicable to Fuels Tax
Editorial Notes
Prior Provisions
A prior subpart B, consisting of sections 4091 to 4093, related to taxation of aviation fuel, prior to repeal by
Amendments
2004—
1990—
1986—
1976—
1965—
§4101. Registration and bond
(a) Registration
(1) In general
Every person required by the Secretary to register under this section with respect to the tax imposed by section 4041(a) or 4081, every person producing or importing biodiesel (as defined in section 40A(d)(1)) or alcohol (as defined in section 6426(b)(4)(A)), every person producing or importing sustainable aviation fuel (as defined in section 40B), and every person producing second generation biofuel (as defined in section 40(b)(6)(E)) shall register with the Secretary at such time, in such form and manner, and subject to such terms and conditions, as the Secretary may by regulations prescribe. A registration under this section may be used only in accordance with regulations prescribed under this section.
(2) Registration of persons within foreign trade zones, etc.
The Secretary shall require registration by any person which—
(A) operates a terminal or refinery within a foreign trade zone or within a customs bonded storage facility, or
(B) holds an inventory position with respect to a taxable fuel in such a terminal.
(3) Display of registration
Every operator of a vessel required by the Secretary to register under this section shall display proof of registration through an identification device prescribed by the Secretary on each vessel used by such operator to transport any taxable fuel.
(4) Registration of persons extending credit on certain exempt sales of fuel
The Secretary shall require registration by any person which—
(A) extends credit by credit card to any ultimate purchaser described in subparagraph (C) or (D) of section 6416(b)(2) for the purchase of taxable fuel upon which tax has been imposed under section 4041 or 4081, and
(B) does not collect the amount of such tax from such ultimate purchaser.
(5) Reregistration in event of change in ownership
Under regulations prescribed by the Secretary, a person (other than a corporation the stock of which is regularly traded on an established securities market) shall be required to reregister under this section if after a transaction (or series of related transactions) more than 50 percent of ownership interests in, or assets of, such person are held by persons other than persons (or persons related thereto) who held more than 50 percent of such interests or assets before the transaction (or series of related transactions).
(b) Bonds and liens
(1) In general
Under regulations prescribed by the Secretary, the Secretary may require, as a condition of permitting any person to be registered under subsection (a), that such person—
(A) give a bond in such sum as the Secretary determines appropriate, and
(B) agree to the imposition of a lien—
(i) on such property (or rights to property) of such person used in the trade or business for which the registration is sought, or
(ii) with the consent of such person, on any other property (or rights to property) of such person as the Secretary determines appropriate.
Rules similar to the rules of section 6323 shall apply to the lien imposed pursuant to this paragraph.
(2) Release or discharge of lien
If a lien is imposed pursuant to paragraph (1), the Secretary shall issue a certificate of discharge or a release of such lien in connection with a transfer of the property if there is furnished to the Secretary (and accepted by him) a bond in such sum as the Secretary determines appropriate or the transferor agrees to the imposition of a substitute lien under paragraph (1)(B) in such sum as the Secretary determines appropriate. The Secretary shall respond to any request to discharge or release a lien imposed pursuant to paragraph (1) in connection with a transfer of property not later than 90 days after the date the request for such a discharge or release is made.
(c) Denial, revocation, or suspension of registration
Rules similar to the rules of section 4222(c) shall apply to registration under this section.
(d) Information reporting
The Secretary may require—
(1) information reporting by any person registered under this section, and
(2) information reporting by such other persons as the Secretary deems necessary to carry out this part.
Any person who is required to report under this subsection and who has 25 or more reportable transactions in a month shall file such report in electronic format.
(Aug. 16, 1954, ch. 736,
Amendment of Subsection (a)(1)
Editorial Notes
Codification
Amendments
2022—Subsec. (a)(1).
2013—Subsec. (a)(1).
2008—Subsec. (a)(1).
2007—Subsec. (a)(4), (5).
2005—Subsec. (a)(1).
Subsec. (a)(4).
2004—Subsec. (a).
Subsec. (a)(2), (3).
Subsec. (d).
2002—Subsec. (e).
"(1)
"(2)
1998—Subsec. (e)(1).
1997—Subsec. (e).
1993—Subsec. (a).
1990—
"(a)
"(b)
1987—Subsec. (a).
1986—
1983—
1976—
1965—
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 13203(d)(2)(C) of
Amendment by section 13704(b)(5) of
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment of this section and repeal of
Amendment by section 15321(b)(3)(A) of
Effective Date of 2005 Amendment
Amendment by section 11113(c) of
Effective Date of 2004 Amendment
Amendment by section 301(b) of
Amendment by section 853(d)(2)(F) of
Effective Date of 2002 Amendment
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Treatment of Deep-Draft Vessels
Publication of Registered Persons
§4102. Inspection of records by local officers
Under regulations prescribed by the Secretary, records required to be kept with respect to taxes under this part shall be open to inspection by such officers of a State, or a political subdivision of any such State, as shall be charged with the enforcement or collection of any tax on any taxable fuel (as defined in section 4083).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1993—
1983—
1976—
Statutory Notes and Related Subsidiaries
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
§4103. Certain additional persons liable for tax where willful failure to pay
In any case in which there is a willful failure to pay the tax imposed by section 4041(a)(1) or 4081, each person—
(1) who is an officer, employee, or agent of the taxpayer who is under a duty to assure the payment of such tax and who willfully fails to perform such duty, or
(2) who willfully causes the taxpayer to fail to pay such tax,
shall be jointly and severally liable with the taxpayer for the tax to which such failure relates.
(Added
Editorial Notes
Amendments
2004—
1993—
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date
Section effective Dec. 1, 1990, see section 11212(f)(2) of
§4104. Information reporting for persons claiming certain tax benefits
(a) In general
The Secretary shall require any person claiming tax benefits—
(1) under the provisions of sections 34, 40, and 40A, to file a return at the time such person claims such benefits (in such manner as the Secretary may prescribe), and
(2) under the provisions of section 4041(b)(2), 6426, or 6427(e) to file a quarterly return (in such manner as the Secretary may prescribe).
(b) Contents of return
Any return filed under this section shall provide such information relating to such benefits and the coordination of such benefits as the Secretary may require to ensure the proper administration and use of such benefits.
(c) Enforcement
With respect to any person described in subsection (a) and subject to registration requirements under this title, rules similar to rules of section 4222(c) shall apply with respect to any requirement under this section.
(Added
Editorial Notes
Amendments
2018—Subsec. (a)(1).
Statutory Notes and Related Subsidiaries
Effective Date
§4105. Two-party exchanges
(a) In general
In a two-party exchange, the delivering person shall not be liable for the tax imposed under section 4081(a)(1)(A)(ii).
(b) Two-party exchange
The term "two-party exchange" means a transaction, other than a sale, in which taxable fuel is transferred from a delivering person registered under section 4101 as a taxable fuel registrant to a receiving person who is so registered where all of the following occur:
(1) The transaction includes a transfer from the delivering person, who holds the inventory position for taxable fuel in the terminal as reflected in the records of the terminal operator.
(2) The exchange transaction occurs before or contemporaneous with completion of removal across the rack from the terminal by the receiving person.
(3) The terminal operator in its books and records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction to the Secretary.
(4) The transaction is the subject of a written contract.
(Added
Editorial Notes
Prior Provisions
Prior
Statutory Notes and Related Subsidiaries
Effective Date
Subchapter B—Coal
Editorial Notes
Prior Provisions
A prior subchapter B consisted of
Section 4111, acts Aug. 16, 1954, ch. 736,
Section 4112, acts Aug. 16, 1954, ch. 736,
Section 4113, act Aug. 16, 1954, ch. 736,
Section 4121, acts Aug. 16, 1954, ch. 736,
Section 4131, act Aug. 16, 1954, ch. 736,
§4121. Imposition of tax
(a) Tax imposed
(1) In general
There is hereby imposed on coal from mines located in the United States sold by the producer, a tax equal to the rate per ton determined under subsection (b).
(2) Limitation on tax
The amount of the tax imposed by paragraph (1) with respect to a ton of coal shall not exceed the applicable percentage (determined under subsection (b)) of the price at which such ton of coal is sold by the producer.
(b) Determination of rates and limitation on tax
For purposes of subsection (a)—
(1) the rate of tax on coal from underground mines shall be $1.10,
(2) the rate of tax on coal from surface mines shall be $.55, and
(3) the applicable percentage shall be 4.4 percent.
(c) Tax not to apply to lignite
The tax imposed by subsection (a) shall not apply in the case of lignite.
(d) Definitions
For purposes of this subchapter—
(1) Coal from surface mines
Coal shall be treated as produced from a surface mine if all of the geological matter above the coal being mined is removed before the coal is extracted from the earth. Coal extracted by auger shall be treated as coal from a surface mine.
(2) Coal from underground mines
Coal shall be treated as produced from an underground mine if it is not produced from a surface mine.
(3) United States
The term "United States" has the meaning given to it by paragraph (1) of section 638.
(4) Ton
The term "ton" means 2,000 pounds.
(Added
Editorial Notes
Prior Provisions
For prior section 4121, see Prior Provisions note set out preceding this section.
Amendments
2022—Subsec. (e).
2020—Subsec. (e)(2)(A).
2019—Subsec. (e)(2)(A).
2008—Subsec. (e)(2)(A).
Subsec. (e)(2)(B).
1987—Subsec. (e)(2)(A).
1986—Subsec. (a).
"(1) 50 cents per ton in the case of coal from underground mines located in the United States, and
"(2) 25 cents per ton in the case of coal from surface mines located in the United States."
Subsec. (b).
Subsec. (e).
"(A) subsection (a) shall be applied—
"(i) by substituting '$1' for '50 cents', and
"(ii) by substituting '50 cents' for '25 cents', and
"(B) subsection (b) shall be applied by substituting '4 percent' for '2 percent'."
1981—Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 1986 Amendments
Effective Date of 1981 Amendment
Effective Date
[
Short Title of 1978 Amendment
For short title of
Special Rules for Refund of the Coal Excise Tax to Certain Coal Producers and Exporters
"(a)
"(1)
"(A)
"(i) a coal producer establishes that such coal producer, or a party related to such coal producer, exported coal produced by such coal producer to a foreign country or shipped coal produced by such coal producer to a possession of the United States, or caused such coal to be exported or shipped, the export or shipment of which was other than through an exporter who meets the requirements of paragraph (2),
"(ii) such coal producer filed an excise tax return on or after October 1, 1990, and on or before the date of the enactment of this Act [Oct. 3, 2008], and
"(iii) such coal producer files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,
then the Secretary shall pay to such coal producer an amount equal to the tax paid under section 4121 of such Code on such coal exported or shipped by the coal producer or a party related to such coal producer, or caused by the coal producer or a party related to such coal producer to be exported or shipped.
"(B)
"(i)
"(ii)
"(iii)
"(I) is made by a court of competent jurisdiction within the United States,
"(II) relates to the constitutionality of any tax paid on exported coal under section 4121 of the Internal Revenue Code of 1986, and
"(III) is in favor of the coal producer or the party related to the coal producer.
"(2)
"(A) an exporter establishes that such exporter exported coal to a foreign country or shipped coal to a possession of the United States, or caused such coal to be so exported or shipped,
"(B) such exporter filed a tax return on or after October 1, 1990, and on or before the date of the enactment of this Act [Oct. 3, 2008], and
"(C) such exporter files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,
then the Secretary shall pay to such exporter an amount equal to $0.825 per ton of such coal exported by the exporter or caused to be exported or shipped, or caused to be exported or shipped, [sic] by the exporter.
"(b)
"(c)
"(d)
"(1)
"(2)
"(A) is indicated in the shipper's export declaration or other documentation as the exporter of record, or
"(B) actually exported such coal to a foreign country or shipped such coal to a possession of the United States, or caused such coal to be so exported or shipped.
"(3)
"(A) is related to such coal producer through any degree of common management, stock ownership, or voting control,
"(B) is related (within the meaning of section 144(a)(3) of the Internal Revenue Code of 1986) to such coal producer, or
"(C) has a contract, fee arrangement, or any other agreement with such coal producer to sell such coal to a third party on behalf of such coal producer.
"(4)
"(e)
"(f)
"(g)
"(1) in the case of a payment to a coal producer, the amount of tax paid under section 4121 of the Internal Revenue Code of 1986 with respect to such coal by such coal producer or a party related to such coal producer, and
"(2) in the case of a payment to an exporter, an amount equal to $0.825 per ton with respect to such coal exported by the exporter or caused to be exported by the exporter.
"(h)
"(i)
"(1)
"(2)
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Subchapter C—Certain Vaccines
Editorial Notes
Prior Provisions
A prior subchapter C consisted of
Section 4141, acts Aug. 16, 1954, ch. 736,
Section 4142, acts Aug. 16, 1954, ch. 736,
Section 4143,
Section 4151, act Aug. 16, 1954, ch. 736,
Section 4152, act Aug. 16, 1954, ch. 736,
§4131. Imposition of tax
(a) General rule
There is hereby imposed a tax on any taxable vaccine sold by the manufacturer, producer, or importer thereof.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) shall be 75 cents per dose of any taxable vaccine.
(2) Combinations of vaccines
If any taxable vaccine is described in more than 1 subparagraph of section 4132(a)(1), the amount of the tax imposed by subsection (a) on such vaccine shall be the sum of the amounts for the vaccines which are so included.
(c) Application of section
The tax imposed by this section shall apply—
(1) after December 31, 1987, and before January 1, 1993, and
(2) during periods after the date of the enactment of the Revenue Reconciliation Act of 1993.
(Added
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1993, referred to in subsec. (c)(2), is the date of enactment of
Amendments
1997—Subsec. (b).
"(b)
"(1)
| "If the taxable vaccine is: | The tax per dose is: |
|---|---|
| DPT vaccine | $4.56 |
| DT vaccine | 0.06 |
| MMR vaccine | 4.44 |
| Polio vaccine | 0.29. |
"(2)
1993—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Effective Date
Floor Stocks Tax
"(1)
"(A) which was sold by the manufacturer, producer, or importer on or before the date of the enactment of this Act [Aug. 10, 1993],
"(B) on which no tax was imposed by section 4131 of the Internal Revenue Code of 1986 (or, if such tax was imposed, was credited or refunded), and
"(C) which is held on such date by any person for sale or use,
there is hereby imposed a tax in the amount determined under section 4131(b) of such Code.
"(2)
"(A)
"(B)
"(C)
"(3)
"(4)
§4132. Definitions and special rules
(a) Definitions relating to taxable vaccines
For purposes of this subchapter—
(1) Taxable vaccine
The term "taxable vaccine" means any of the following vaccines which are manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing:
(A) Any vaccine containing diphtheria toxoid.
(B) Any vaccine containing tetanus toxoid.
(C) Any vaccine containing pertussis bacteria, extracted or partial cell bacteria, or specific pertussis antigens.
(D) Any vaccine against measles.
(E) Any vaccine against mumps.
(F) Any vaccine against rubella.
(G) Any vaccine containing polio virus.
(H) Any HIB vaccine.
(I) Any vaccine against hepatitis A.
(J) Any vaccine against hepatitis B.
(K) Any vaccine against chicken pox.
(L) Any vaccine against rotavirus gastroenteritis.
(M) Any conjugate vaccine against streptococcus pneumoniae.
(N) Any trivalent vaccine against influenza or any other vaccine against seasonal influenza.
(O) Any meningococcal vaccine.
(P) Any vaccine against the human papillomavirus.
(2) Vaccine
The term "vaccine" means any substance designed to be administered to a human being for the prevention of 1 or more diseases.
(3) United States
The term "United States" has the meaning given such term by section 4612(a)(4).
(4) Importer
The term "importer" means the person entering the vaccine for consumption, use, or warehousing.
(b) Credit or refund where vaccine returned to manufacturer, etc., or destroyed
(1) In general
Under regulations prescribed by the Secretary, whenever any vaccine on which tax was imposed by section 4131 is—
(A) returned (other than for resale) to the person who paid such tax, or
(B) destroyed,
the Secretary shall abate such tax or allow a credit, or pay a refund (without interest), to such person equal to the tax paid under section 4131 with respect to such vaccine.
(2) Claim must be filed within 6 months
Paragraph (1) shall apply to any returned or destroyed vaccine only with respect to claims filed within 6 months after the date the vaccine is returned or destroyed.
(3) Condition of allowance of credit or refund
No credit or refund shall be allowed or made under paragraph (1) with respect to any vaccine unless the person who paid the tax establishes that he—
(A) has repaid or agreed to repay the amount of the tax to the ultimate purchaser of the vaccine, or
(B) has obtained the written consent of such purchaser to the allowance of the credit or the making of the refund.
(4) Tax imposed only once
No tax shall be imposed by section 4131 on the sale of any vaccine if tax was imposed by section 4131 on any prior sale of such vaccine and such tax is not abated, credited, or refunded.
(c) Other special rules
(1) Certain uses treated as sales
Any manufacturer, producer, or importer of a vaccine which uses such vaccine before it is sold shall be liable for the tax imposed by section 4131 in the same manner as if such vaccine were sold by such manufacturer, producer, or importer.
(2) Treatment of vaccines shipped to United States possessions
Section 4221(a)(2) shall not apply to any vaccine shipped to a possession of the United States.
(3) Fractional part of a dose
In the case of a fraction of a dose, the tax imposed by section 4131 shall be the same fraction of the amount of such tax imposed by a whole dose.
(4) Disposition of revenues from Puerto Rico and the Virgin Islands
The provisions of subsections (a)(3) and (b)(3) of section 7652 shall not apply to any tax imposed by section 4131.
(Added
Editorial Notes
Amendments
2013—Subsec. (a)(1)(N).
2006—Subsec. (a)(1)(O), (P).
2004—Subsec. (a)(1)(I) to (M).
Subsec. (a)(1)(N).
1999—Subsec. (a)(1)(K).
Subsec. (a)(1)(L).
1998—Subsec. (a)(1)(K).
1997—Subsec. (a)(1).
"(A) which is listed in the table contained in section 4131(b)(1), and
"(B) which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing."
Subsec. (a)(2) to (8).
"(2) DPT
"(3) DT
"(4) MMR
"(5)
1988—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2013 Amendment
"(1)
"(A) the first day of the first month which begins more than 4 weeks after the date of the enactment of this Act [June 25, 2013], or
"(B) the date on which the Secretary of Health and Human Services lists any vaccine against seasonal influenza (other than any vaccine against seasonal influenza listed by the Secretary prior to the date of the enactment of this Act) for purposes of compensation for any vaccine-related injury or death through the Vaccine Injury Compensation Trust Fund.
"(2)
Effective Date of 2006 Amendment
"(1)
"(2)
Effective Date of 2004 Amendment
"(1)
"(2)
"(1)
"(A) the first day of the first month which begins more than 4 weeks after the date of the enactment of this Act [Oct. 22, 2004], or
"(B) the date on which the Secretary of Health and Human Services lists any vaccine against influenza for purposes of compensation for any vaccine-related injury or death through the Vaccine Injury Compensation Trust Fund.
"(2)
Effective Date of 1999 Amendment
"(A)
"(B)
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1988 Amendment
Limitation on Certain Credits or Refunds
Subchapter D—Recreational Equipment
Editorial Notes
Amendments
1965—
PART I—SPORTING GOODS
Editorial Notes
Amendments
1984—
§4161. Imposition of tax
(a) Sport fishing equipment
(1) Imposition of tax
(A) In general
There is hereby imposed on the sale of any article of sport fishing equipment by the manufacturer, producer, or importer a tax equal to 10 percent of the price for which so sold.
(B) Limitation on tax imposed on fishing rods and poles
The tax imposed by subparagraph (A) on any fishing rod or pole shall not exceed $10.
(2) 3 percent rate of tax for electric outboard motors
In the case of an electric outboard motor, paragraph (1) shall be applied by substituting "3 percent" for "10 percent".
(3) 3 percent rate of tax for tackle boxes
In the case of fishing tackle boxes, paragraph (1) shall be applied by substituting "3 percent" for "10 percent".
(4) Parts or accessories sold in connection with taxable sale
In the case of any sale by the manufacturer, producer, or importer of any article of sport fishing equipment, such article shall be treated as including any parts or accessories of such article sold on or in connection therewith or with the sale thereof.
(b) Bows and arrows, etc.
(1) Bows
(A) In general
There is hereby imposed on the sale by the manufacturer, producer, or importer of any bow which has a peak draw weight of 30 pounds or more, a tax equal to 11 percent of the price for which so sold.
(B) Archery equipment
There is hereby imposed on the sale by the manufacturer, producer, or importer—
(i) of any part or accessory suitable for inclusion in or attachment to a bow described in subparagraph (A), and
(ii) of any quiver, broadhead, or point suitable for use with an arrow described in paragraph (2),
a tax equal to 11 percent of the price for which so sold.
(2) Arrows
(A) In general
There is hereby imposed on the first sale by the manufacturer, producer, or importer of any shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—
(i) measures 18 inches overall or more in length, or
(ii) measures less than 18 inches overall in length but is suitable for use with a bow described in paragraph (1)(A),
a tax equal to 39 cents per shaft.
(B) Exemption for certain wooden arrow shafts
Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—
(i) measures 5/16 of an inch or less in diameter, and
(ii) is not suitable for use with a bow described in paragraph (1)(A).
(C) Adjustment for inflation
(i) In general
In the case of any calendar year beginning after 2005, the 39-cent amount specified in subparagraph (A) shall be increased by an amount equal to the product of—
(I) such amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting "2004" for "2016" in subparagraph (A)(ii) thereof.
(ii) Rounding
If any increase determined under clause (i) is not a multiple of 1 cent, such increase shall be rounded to the nearest multiple of 1 cent.
(3) Coordination with subsection (a)
No tax shall be imposed under this subsection with respect to any article taxable under subsection (a).
(Aug. 16, 1954, ch. 736,
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
Amendments
2017—Subsec. (b)(2)(C)(i)(II).
2008—Subsec. (b)(2)(B), (C).
2005—Subsec. (a)(1).
Subsec. (a)(2).
"(A)
"(B) $30
2004—Subsec. (a)(3), (4).
Subsec. (b)(1).
Subsec. (b)(1)(B)(ii).
Subsec. (b)(2).
Subsec. (b)(3), (4).
1997—Subsec. (b).
1986—Subsec. (b)(1)(B)(ii).
1984—Subsec. (a).
Subsec. (b)(1)(B).
Subsec. (b)(2)(A).
Subsec. (b)(3).
1972—Subsec. (a).
Subsec. (b).
1965—
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendments
Effective Date of 1997 Amendment
Effective Date of 1984 Amendment
Amendment by section 1015(a) of
Effective Date of 1972 Amendment
Effective Date of 1965 Amendment
"(1)
"(2)
"(3)
"(A) a lease,
"(B) a contract for the sale of an article where it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,
"(C) a conditional sale, or
"(D) a chattel mortgage arrangement wherein it is provided that the sale price shall be paid in installments,
entered into before such day or such date, payments made on or after such day or such date with respect to the article leased or sold shall, for purposes of this subsection, be considered as payments made with respect to an article sold on or after such day or such date, if the lessor or vendor establishes that the amount of payments payable on or after such day or such date with respect to such article has been reduced by an amount equal to the tax reduction applicable with respect to the lease or sale of such article.
"(4)
Construction of 2004 Amendment
§4162. Definitions; treatment of certain resales
(a) Sport fishing equipment defined
For purposes of this part, the term "sport fishing equipment" means—
(1) fishing rods and poles (and component parts therefor),
(2) fishing reels,
(3) fly fishing lines, and other fishing lines not over 130 pounds test,
(4) fishing spears, spear guns, and spear tips,
(5) items of terminal tackle, including—
(A) leaders,
(B) artificial lures,
(C) artificial baits,
(D) artificial flies,
(E) fishing hooks,
(F) bobbers,
(G) sinkers,
(H) snaps,
(I) drayles, and
(J) swivels,
but not including natural bait or any item of terminal tackle designed for use and ordinarily used on fishing lines not described in paragraph (3), and
(6) the following items of fishing supplies and accessories—
(A) fish stringers,
(B) creels,
(C) tackle boxes,
(D) bags, baskets, and other containers designed to hold fish,
(E) portable bait containers,
(F) fishing vests,
(G) landing nets,
(H) gaff hooks,
(I) fishing hook disgorgers, and
(J) dressing for fishing lines and artificial flies,
(7) fishing tip-ups and tilts,
(8) fishing rod belts, fishing rodholders, fishing harnesses, fish fighting chairs, fishing outriggers, and fishing downriggers, and
(9) electric outboard boat motors.
(b) Treatment of certain resales
(1) In general
If—
(A) the manufacturer, producer, or importer sells any article taxable under section 4161(a) to any person,
(B) the constructive sale price rules of section 4216(b) do not apply to such sale, and
(C) such person (or any other person) sells such article to a related person with respect to the manufacturer, producer, or importer,
then such related person shall be liable for tax under section 4161 in the same manner as if such related person were the manufacturer of the article.
(2) Credit for tax previously paid
If—
(A) tax is imposed on the sale of any article by reason of paragraph (1), and
(B) the related person establishes the amount of the tax which was paid on the sale described in paragraph (1)(A),
the amount of the tax so paid shall be allowed as a credit against the tax imposed by reason of paragraph (1).
(3) Related person
For purposes of this subsection, the term "related person" has the meaning given such term by section 465(b)(3)(C).
(4) Regulations
Except to the extent provided in regulations, rules similar to the rules of this subsection shall also apply in cases (not described in paragraph (1)) in which intermediaries or other devices are used for purposes of reducing the amount of the tax imposed by section 4161(a).
(Added
Editorial Notes
Amendments
2004—Subsec. (a)(8) to (10).
Subsecs. (b), (c).
"(1) a graph recorder,
"(2) a digital type,
"(3) a meter readout, or
"(4) a combination graph recorder or combination meter readout."
1986—Subsec. (a)(6)(I).
Subsec. (c)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Effective Date of 1986 Amendment
Amendment by section 201(d)(7)(C), (12) of
Amendment by section 201(d)(7)(C), (12) of
Amendment by section 1878(b) of
Effective Date
"(1)
"(2)
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[PART II—REPEALED]
[§§4171 to 4173. Repealed. Pub. L. 89–44, title II, §205(b), June 21, 1965, 79 Stat. 140 ]
Section 4171, act Aug. 16, 1954, ch. 736,
Section 4172, act Aug. 16, 1954, ch. 736,
Section 4173, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable with respect to articles sold on or after June 22, 1965, see section 701(a) of
PART III—FIREARMS
§4181. Imposition of tax
There is hereby imposed upon the sale by the manufacturer, producer, or importer of the following articles a tax equivalent to the specified percent of the price for which so sold:
Articles taxable at 10 percent—
Pistols.
Revolvers.
Articles taxable at 11 percent—
Firearms (other than pistols and revolvers).
Shells, and cartridges.
(Aug. 16, 1954, ch. 736,
§4182. Exemptions
(a) Machine guns and short barrelled firearms
The tax imposed by section 4181 shall not apply to any firearm on which the tax provided by section 5811 has been paid.
(b) Sales to defense department
No firearms, pistols, revolvers, shells, and cartridges purchased with funds appropriated for the military department shall be subject to any tax imposed on the sale or transfer of such articles.
(c) Small manufacturers, etc.
(1) In general
The tax imposed by section 4181 shall not apply to any pistol, revolver, or firearm described in such section if manufactured, produced, or imported by a person who manufactures, produces, and imports less than an aggregate of 50 of such articles during the calendar year.
(2) Controlled groups
All persons treated as a single employer for purposes of subsection (a) or (b) of section 52 shall be treated as one person for purposes of paragraph (1).
(d) Records
Notwithstanding the provisions of
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2005—Subsecs. (c), (d).
1969—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
"(1)
"(2)
Short Title of 1969 Amendment
[Subchapter E—Repealed]
Editorial Notes
Prior Provisions
A prior subchapter E consisted of
Section 4191, act Aug. 16, 1954, ch. 736,
Section 4192, acts Aug. 16, 1954, ch. 736,
Section 4201, acts Aug. 16, 1954, ch. 736,
Section 4211, act Aug. 16, 1954, ch. 736,
[§4191. Repealed. Pub. L. 116–94, div. N, title I, §501(a), Dec. 20, 2019, 133 Stat. 3118 ]
Section, added
For prior sections 4191, 4192, 4201, and 4211, see Prior Provisions note set out preceding this section.
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to sales after Dec. 31, 2019, see section 501(d) of
Subchapter F—Special Provisions Applicable to Manufacturers Tax
Editorial Notes
Amendments
1958—
1956—Act June 29, 1956, ch. 462, title II, §207(b),
§4216. Definition of price
(a) Containers, packing and transportation charges.
In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary in accordance with the regulations.
(b) Constructive sale price
(1) In general
If an article is—
(A) sold at retail,
(B) sold on consignment, or
(C) sold (otherwise than through an arm's length transaction) at less than the fair market price,
the tax under this chapter shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. In the case of an article sold at retail, the computation under the preceding sentence shall be on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. This paragraph shall not apply if paragraph (2) applies.
(2) Special rule
If an article is sold at retail or to a retailer, and if—
(A) the manufacturer, producer, or importer of such article regularly sells such articles at retail or to retailers, as the case may be,
(B) the manufacturer, producer, or importer of such article regularly sells such articles to one or more wholesale distributors in arm's length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph, and
(C) the transaction is an arm's length transaction,
the tax under this chapter shall (if based on the price for which the article is sold) be computed on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold by such manufacturer, producer, or importer to wholesale distributors (other than special dealers).
(3) Constructive sale price in case of certain articles
Except as provided in paragraph (4), for purposes of paragraph (1), if—
(A) the manufacturer, producer, or importer of an article regularly sells such article to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer, and
(B) such distributor regularly sells such article to one or more independent retailers, but does not regularly sell to wholesale distributors,
the constructive sale price of such article shall be 90 percent of the lowest price for which such distributor regularly sells such article in arm's-length transactions to such independent retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustments under subsections (a) and (e) and under section 6416(b)(1). If both this paragraph and paragraph (4) apply with respect to an article, the constructive sale price for such article shall be the lower of the constructive sale price determined under this paragraph or paragraph (4).
(4) Constructive sale price in case of certain other articles
For purposes of paragraph (1), if—
(A) the manufacturer, producer, or importer of an article regularly sells (except for tax-free sales) only to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer,
(B) the distributor regularly sells (except for tax-free sales) such article only to retailers, and
(C) the normal method of sales for such articles within the industry by manufacturers, producers, or importers is to sell such articles in arm's-length transactions to distributors,
the constructive sale price for such article shall be the price at which such article is sold to retailers by the distributor, reduced by a percentage of such price equal to the percentage which (i) the difference between the price for which comparable articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, and the price at which such wholesale distributors in arm's-length transactions sell such comparable articles to retailers, is of (ii) the price at which such wholesale distributors in arm's-length transactions sell such comparable articles to retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustment under subsections (a) and (e) and under section 6416(b)(1).
(5) Definition of lowest price
For purposes of paragraphs (1) and (3), the lowest price shall be determined—
(A) without requiring that any given percentage of sales be made at that price, and
(B) without including any fixed amount to which the purchaser has a right as a result of contractual arrangements existing at the time of the sale.
(c) Partial payments
In the case of—
(1) a lease (other than a lease to which section 4217(b) applies),
(2) a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,
(3) a conditional sale, or
(4) a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments,
there shall be paid upon each payment with respect to the article a percentage of such payment equal to the rate of tax in effect on the date such payment is due.
(d) Sales of installment accounts
If installment accounts, with respect to payments on which tax is being computed as provided in subsection (c), are sold or otherwise disposed of, then subsection (c) shall not apply with respect to any subsequent payments on such accounts (other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section 6416(b)(5)), but instead—
(1) there shall be paid an amount equal to the difference between (A) the tax previously paid on the payments on such installment accounts, and (B) the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in subsection (c)); except that
(2) if any such sale is pursuant to the order of, or subject to the approval of, a court of competent jurisdiction in a bankruptcy or insolvency proceeding, the amount computed under paragraph (1) shall not exceed the sum of the amounts computed by multiplying (A) the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment by (B) the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due.
The sum of the amounts payable under this subsection and subsection (c) in respect of the sale of any article shall not exceed the total tax.
(e) Exclusion of local advertising charge from sale price
(1) Exclusion
In determining, for purposes of this chapter, the price for which an article is sold, there shall be excluded a charge for local advertising (as defined in paragraph (4)) to the extent that such charge—
(A) does not exceed 5 percent of the price for which the article is sold (as determined under this section by excluding any charge for local advertising),
(B) is a separate charge made when the article is sold, and
(C) is intended to be refunded to the purchaser or any subsequent vendee in reimbursement of costs incurred for local advertising.
In the case of any such charge (or portion thereof) which is not so refunded before the first day of the fifth calendar month following the calendar year during which the article was sold, the exclusion provided by the preceding sentence shall cease to apply as of such first day.
(2) Aggregate amount which may be excluded
In the case of articles upon the sale of which tax was imposed under the same section of this chapter—
(A) The sum of (i) the aggregate of the charges for local advertising excluded under paragraph (1), plus (ii) the aggregate of the readjustments for local advertising under section 6416(b)(1) (relating to credits or refunds for price readjustments), shall not exceed
(B) 5 percent of the aggregate of the prices (determined under this section by excluding all charges for local advertising) at which such articles were sold in sales on which tax was imposed by such section of this chapter.
The preceding sentence shall be applied to each manufacturer, producer, and importer as of the close of each calendar quarter, taking into account the items specified in subparagraphs (A) and (B) for such calendar quarter and preceding calendar quarters in the same calendar year.
(3) No adjustment for other advertising charges
Except to the extent provided by paragraphs (1) and (2), no charge or expenditure for advertising shall serve, for purposes of this section or section 6416(b)(1), as the basis for an exclusion from, or as a readjustment of, the price of any article.
(4) Local advertising defined
For purposes of this section and section 6416(b)(1), the term "local advertising" means only advertising which—
(A) is initiated or obtained by the purchaser or any subsequent vendee,
(B) names the article for which the price is determinable under this section and states the location at which such article may be purchased at retail, and
(C) is broadcast over a radio station or television station, appears in a newspaper or magazine, or is displayed by means of an outdoor advertising sign or poster.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1984—Subsec. (b)(1).
Subsec. (b)(2)(B) to (D).
Subsec. (b)(3).
Subsec. (b)(5), (6).
Subsec. (f).
1978—Subsec. (b)(1).
1976—Subsec. (a).
Subsec. (b).
Subsecs. (d) to (g).
1971—Subsec. (b)(2)(C), (5).
Subsec. (g).
1970—Subsec. (b)(3).
Subsec. (b)(4).
Subsec. (b)(5), (6).
1969—Subsec. (b)(3), (4).
1965—Subsec. (b)(2).
Subsec. (b)(3).
Subsec. (c).
Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (g).
1962—Subsec. (b)(2)(C).
Subsec. (f)(4)(C).
1960—Subsec. (f).
1958—Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
1955—Subsec. (c)(1). Act Aug. 9, 1955, §1, inserted "(other than a lease to which subsection (d) applies)".
Subsec. (d). Act Aug. 9, 1955, §2, added subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1978 Amendment
Effective Date of 1976 Amendment
Amendment by section 1904(a)(2) of
Effective Date of 1971 Amendment
Amendment by
Effective Date of 1970 Amendment
Effective Date of 1969 Amendment
Effective Date of 1965 Amendment
Amendment by section 207(a), (b) of
Effective Date of 1962 Amendments
Effective Date of 1960 Amendment
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1955 Amendment
Act Aug. 9, 1955, ch. 677, §4,
"(1) the fair market value of such article shall be the fair market value determined as of such effective date;
"(2) only payments under a lease received on or after such effective date shall be considered in determining when the total tax (as defined in such section 4216(d)) has been paid;
"(3) any lease existing on such effective date, or if there is none, the first lease entered into after such effective date, shall be considered an initial lease (except that fair market value shall be determined as provided in paragraph (1) of this sentence); and
"(4) any lease existing on such effective date shall be considered as having been entered into on such date."
§4217. Leases
(a) Lease considered as sale
For purposes of this chapter, the lease of an article (including any renewal or any extension of a lease or any subsequent lease of such article) by the manufacturer, producer, or importer shall be considered a sale of such article.
(b) Limitation on tax
In the case of any lease described in subsection (a) of an article taxable under this chapter, if the tax under this chapter is based on the price for which such articles are sold, there shall be paid on each lease payment with respect to such article a percentage of such payment equal to the rate of tax in effect on the date of such payment, until the total of the tax payments under such lease and any prior lease to which this subsection applies equals the total tax.
(c) Definition of total tax
For purposes of this section, the term "total tax" means—
(1) except as provided in paragraph (2), the tax computed on the constructive sale price for such article which would be determined under section 4216(b) if such article were sold at retail on the date of the first lease to which subsection (b) applies; or
(2) if the first lease to which subsection (b) applies is not the first lease of the article, the tax computed on the fair market value of such article on the date of the first lease to which subsection (b) applies.
Any such computation of tax shall be made at the applicable rate specified in this chapter in effect on the date of the first lease to which subsection (b) applies.
(d) Special rules
(1) Lessor must also be engaged in selling
Subsection (b) shall not apply to any lease of an article unless at the time of making the lease, or any prior lease of such article to which subsection (b) applies, the person making the lease or prior lease was also engaged in the business of selling in arm's length transactions the same type and model of article.
(2) Sale before total tax becomes payable
If the taxpayer sells an article before the total tax has become payable, then the tax payable on such sale shall be whichever of the following is the smaller:
(A) the difference between (i) the tax imposed on lease payments under leases of such article to which subsection (b) applies, and (ii) the total tax, or
(B) a tax computed, at the rate in effect on the date of the sale, on the price for which the article is sold.
For purposes of subparagraph (B), if the sale is at arm's length, section 4216(b) shall not apply.
(3) Sale after total tax has become payable
If the taxpayer sells an article after the total tax has become payable, no tax shall be imposed under this chapter on such sale.
(e) Leases of automobiles subject to gas guzzler tax
(1) In general
In the case of the lease of an automobile the sale of which by the manufacturer would be taxable under section 4064, the foregoing provisions of this section shall not apply, but, for purposes of this chapter—
(A) the first lease of such automobile by the manufacturer shall be considered to be a sale, and
(B) any lease of such automobile by the manufacturer after the first lease of such automobile shall not be considered to be a sale.
(2) Payment of tax
In the case of a lease described in paragraph (1)(A)—
(A) there shall be paid by the manufacturer on each lease payment that portion of the total gas guzzler tax which bears the same ratio to such total gas guzzler tax as such payment bears to the total amount to be paid under such lease,
(B) if such lease is canceled, or the automobile is sold or otherwise disposed of, before the total gas guzzler tax is payable, there shall be paid by the manufacturer on such cancellation, sale, or disposition the difference between the tax imposed under subparagraph (A) on the lease payments and the total gas guzzler tax, and
(C) if the automobile is sold or otherwise disposed of after the total gas guzzler tax is payable, no tax shall be imposed under section 4064 on such sale or disposition.
(3) Definitions
For purposes of this subsection—
(A) Manufacturer
The term "manufacturer" includes a producer or importer.
(B) Total gas guzzler tax
The term "total gas guzzler tax" means the tax imposed by section 4064, computed at the rate in effect on the date of the first lease.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1978—Subsec. (e).
1976—Subsec. (d)(4).
1958—
Subsec. (a).
Subsecs. (b) to (d).
1955—Act Aug. 9, 1955, exempted lease of an article upon which tax has been paid under section 4216(d)(1) or
Statutory Notes and Related Subsidiaries
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1955 Amendment
Section effective on first day of first month which begins more than ten days after Aug. 9, 1955, see section 4 of act Aug. 9, 1955, set out as a note under
Application of Leases of Utility Trailers
§4218. Use by manufacturer or importer considered sale
(a) General rule
If any person manufactures, produces, or imports an article (other than a tire taxable under section 4071) and uses it (otherwise than as material in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or produced by him), then he shall be liable for tax under this chapter in the same manner as if such article were sold by him. This subsection shall not apply in the case of gasoline used by any person, for nonfuel purposes, as a material in the manufacture or production of another article to be manufactured or produced by him. For the purpose of applying the first sentence of this subsection to coal taxable under section 4121, the words "(otherwise than as material in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or produced by him)" shall be disregarded.
(b) Tires
If any person manufactures, produces, or imports a tire taxable under section 4071, and sells it on or in connection with the sale of any article, or uses it, then he shall be liable for tax under this chapter in the same manner as if such article were sold by him.
(c) Computation of tax
Except as provided in section 4223(b), in any case in which a person is made liable for tax by the preceding provisions of this section, the tax (if based on the price for which the article is sold) shall be computed on the price at which such or similar articles are sold, in the ordinary course of trade, by manufacturers, producers, or importers, thereof, as determined by the Secretary.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1984—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
1978—Subsec. (a).
1976—Subsec. (e).
1965—Subsec. (b).
Subsec. (c).
1961—Subsec. (a).
1960—Subsec. (a).
Subsec. (b).
Subsecs. (d), (e).
1958—
1955—Subsec. (a)(1). Act Aug. 11, 1955, §1(a), inserted as tax exempt articles under this chapter, automobile parts or accessories, refrigerator, radio, or television components, or camera lenses taxable under section 4061(b), 4111, or 4171, respectively, of this title.
Subsec. (b). Act Aug. 11, 1955, §1(b), excepted from application of section automobile parts or accessories, refrigerator, radio, or television components, and camera lenses, taxable under sections 4061(b), 4111, 4141, and 4171, respectively, of this title, when for use by the purchaser in the manufacture or production of, or as a component part of, any article.
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Effective Date of 1961 Amendment
Amendment by
Effective Date of 1960 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1955 Amendment
Amendment by act Aug. 11, 1955, effective on first day of first month which begins more than ten days after Aug. 11, 1955, see section 3 of act Aug. 11, 1955, set out as a note under
§4219. Application of tax in case of sales by other than manufacturer or importer
In case any person acquires from the manufacturer, producer, or importer of an article, by operation of law or as a result of any transaction not taxable under this chapter, the right to sell such article, the sale of such article by such person shall be taxable under this chapter as if made by the manufacturer, producer, or importer, and such person shall be liable for the tax.
(Aug. 16, 1954, ch. 736,
[§§4220 to 4225. Repealed. Pub. L. 85–859, title I, §119(a), Sept. 2, 1958, 72 Stat. 1282 ]
Section 4220, acts Aug. 16, 1954, ch. 736,
For sections 4221 to 4225, see Prior Provisions notes set out under
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective on first day of first calendar quarter which begins more than 60 days after Sept. 2, 1958, see section 1(c) of
Subchapter G—Exemptions, Registration, Etc.
Editorial Notes
Amendments
1986—
1983—
1976—
1965—
1958—
§4221. Certain tax-free sales
(a) General rule
Under regulations prescribed by the Secretary, no tax shall be imposed under this chapter (other than under section 4121 or 4081) on the sale by the manufacturer (or under subchapter C of
(1) for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture,
(2) for export, or for resale by the purchaser to a second purchaser for export,
(3) for use by the purchaser as supplies for vessels or aircraft,
(4) to a State or local government for the exclusive use of a State or local government,
(5) to a nonprofit educational organization for its exclusive use, or
(6) to a qualified blood collector organization (as defined in section 7701(a)(49)) for such organization's exclusive use in the collection, storage, or transportation of blood,
but only if such exportation or use is to occur before any other use. Paragraphs (4), (5), and (6) shall not apply to the tax imposed by section 4064. In the case of taxes imposed by section 4051 or 4071, paragraphs (4) and (5) shall not apply on and after October 1, 2028. In the case of the tax imposed by section 4131, paragraphs (3), (4), and (5) shall not apply and paragraph (2) shall apply only if the use of the exported vaccine meets such requirements as the Secretary may by regulations prescribe. In the case of taxes imposed by subchapter C or D, paragraph (6) shall not apply.
(b) Proof of resale for further manufacture; proof of export
Where an article has been sold free of tax under subsection (a)—
(1) for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, or
(2) for export, or for resale by the purchaser to a second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of such article unless, within the 6-month period which begins on the date of the sale by the manufacturer (or, if earlier, on the date of shipment by the manufacturer), the manufacturer receives proof that the article has been exported or resold for use in further manufacture.
(c) Manufacturer relieved from liability in certain cases
In the case of any article sold free of tax under this section (other than a sale to which subsection (b) applies), and in the case of any article sold free of tax under section 4053(6), if the manufacturer in good faith accepts a certification by the purchaser that the article will be used in accordance with the applicable provisions of law, no tax shall thereafter be imposed under this chapter in respect of such sale by such manufacturer.
(d) Definitions
For purposes of this section—
(1) Manufacturer
The term "manufacturer" includes a producer or importer of an article, and, in the case of taxes imposed by subchapter C of
(2) Export
The term "export" includes shipment to a possession of the United States; and the term "exported" includes shipped to a possession of the United States.
(3) Supplies for vessels or aircraft
The term "supplies for vessels or aircraft" means fuel supplies, ships' stores, sea stores, or legitimate equipment on vessels of war of the United States or of any foreign nation, vessels employed in the fisheries or in the whaling business, or vessels actually engaged in foreign trade or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions. For purposes of the preceding sentence, the term "vessels" includes civil aircraft employed in foreign trade or trade between the United States and any of its possessions, and the term "vessels of war of the United States or of any foreign nation" includes aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof.
(4) State or local government
The term "State or local government" means any State, any political subdivision thereof, or the District of Columbia.
(5) Nonprofit educational organization
The term "nonprofit educational organization" means an educational 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.
(6) Use in further manufacture
An article shall be treated as sold for use in further manufacture if—
(A) such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or produced by him; or
(B) in the case of gasoline taxable under section 4081, such gasoline is sold for use by the purchaser, for nonfuel purposes, as a material in the manufacture or production of another article to be manufactured or produced by him.
(7) Qualified bus
(A) In general
The term "qualified bus" means—
(i) an intercity or local bus, and
(ii) a school bus.
(B) Intercity or local bus
The term "intercity or local bus" means any automobile bus which is used predominantly in furnishing (for compensation) passenger land transportation available to the general public if—
(i) such transportation is scheduled and along regular routes, or
(ii) the seating capacity of such bus is at least 20 adults (not including the driver).
(C) School bus
The term "school bus" means any automobile bus substantially all the use of which is in transporting students and employees of schools. For purposes of the preceding sentence, the term "school" means an educational organization which 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 carried on.
(e) Special rules
(1) Reciprocity required in case of civil aircraft
In the case of articles sold for use as supplies for aircraft, the privileges granted under subsection (a)(3) in respect of civil aircraft employed in foreign trade or trade between the United States and any of its possessions, in respect of aircraft registered in a foreign country, shall be allowed only if the Secretary of the Treasury has been advised by the Secretary of Commerce that he has found that such foreign country allows, or will allow, substantially reciprocal privileges in respect of aircraft registered in the United States. If the Secretary of the Treasury is advised by the Secretary of Commerce that he has found that a foreign country has discontinued or will discontinue the allowance of such privileges, the privileges granted under subsection (a)(3) shall not apply thereafter in respect of civil aircraft registered in that foreign country and employed in foreign trade or trade between the United States and any of its possessions.
(2) Tires
(A) Tax-free sales
Under regulations prescribed by the Secretary, no tax shall be imposed under section 4071 on the sale by the manufacturer of a tire if—
(i) such tire is sold for use by the purchaser for sale on or in connection with the sale of another article manufactured or produced by such purchaser; and
(ii) such other article is to be sold by such purchaser in a sale which either will satisfy the requirements of paragraph (2), (3), (4), or (5) of subsection (a) for a tax-free sale, or would satisfy such requirements but for the fact that such other article is not subject to tax under this chapter.
(B) Proof
Where a tire has been sold free of tax under this paragraph, this paragraph shall cease to apply unless, within the 6-month period which begins on the date of the sale by him (or, if earlier, on the date of the shipment by him), the manufacturer of such tire receives proof that the other article referred to in clause (ii) of subparagraph (A) has been sold in a manner which satisfies the requirements of such clause (ii) (including in the case of a sale for export, proof of export of such other article).
(C) Subsection (a)(1) does not apply
Paragraph (1) of subsection (a) shall not apply with respect to the tax imposed under section 4071 on the sale of a tire.
(3) Tires used on intercity, local, and school buses
Under regulations prescribed by the Secretary, the tax imposed by section 4071 shall not apply in the case of tires sold for use by the purchaser on or in connection with a qualified bus.
(Added
Editorial Notes
Codification
Section 1207(b)(1)–(3)(A) of
Prior Provisions
A prior section 4221, act Aug. 16, 1954, ch. 736,
Amendments
2021—Subsec. (a).
2019—Subsec. (a).
2018—Subsec. (a).
2015—Subsec. (a).
2014—Subsec. (a).
Subsec. (c).
Subsec. (d)(1).
2012—Subsec. (a).
2011—Subsec. (a).
2010—Subsec. (a).
2006—Subsec. (a).
Subsec. (a)(6).
2005—Subsec. (a).
2004—Subsec. (a).
1998—Subsec. (a).
Subsec. (c).
1993—Subsec. (c).
1991—Subsec. (a).
1990—Subsec. (a).
Subsec. (c).
Subsec. (d)(1).
1989—Subsec. (c).
1987—Subsec. (a).
1986—Subsec. (a).
1984—Subsec. (a).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(6).
Subsec. (d)(6)(A).
Subsec. (d)(6)(B), (C).
Subsec. (e)(2).
Subsec. (e)(3) to (6).
1983—Subsec. (a).
Subsec. (c).
1980—Subsec. (e)(6).
1978—Subsec. (a).
Subsec. (c).
Subsec. (d)(7).
Subsec. (e)(5).
Subsec. (e)(6).
1976—
1971—Subsec. (c).
1969—Subsec. (d)(5).
1965—Subsec. (d)(6)(B).
Subsec. (d)(6).
Subsec. (e)(2).
Subsec. (e)(3).
Subsec. (e)(5).
Subsec. (f).
1961—Subsec. (d)(6)(C).
1960—Subsec. (d)(4).
Subsec. (e)(4).
1959—Subsec. (d)(4).
Subsec. (d)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
Amendment by
Effective Date of 2014 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2010 Amendment
Effective Date of 2006 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1993 Amendment
Effective Date of 1990 Amendment
"(1)
"(2)
Effective Date of 1987 Amendments
Amendment by section 9201(b)(1) of
Amendment by section 10502(d)(4) of
Effective Date of 1986 Amendments
Amendment by
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by section 515(b)(1) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendments
Amendment by section 201(c)(1) of
Amendment by section 233(c)(1), (2) of
Amendment by
Effective Date of 1971 Amendment
Amendment by
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by section 208(d) of
Amendment by section 801(c), (d)(1) of
Effective Date of 1961 Amendment
Amendment by
Effective Date of 1960 Amendments
Amendment by
Effective Date of 1959 Amendments
Amendment by
Amendment by
Effective Date
Section effective on first day of first calendar quarter which begins more than 60 days after Sept. 2, 1958, see section 1(c) of
§4222. Registration
(a) General rule
Except as provided in subsection (b), section 4221 shall not apply with respect to the sale of any article unless the manufacturer, the first purchaser, and the second purchaser (if any) are all registered under this section. Registration under this section shall be made at such time, in such manner and form, and subject to such terms and conditions, as the Secretary may by regulations prescribe. A registration under this section may be used only in accordance with regulations prescribed under this section.
(b) Exceptions
(1) Purchases by State and local governments
Subsection (a) shall not apply to any State or local government in connection with the purchase by it of any article if such State or local government complies with such regulations relating to the use of exemption certificates in lieu of registration as the Secretary shall prescribe to carry out the purpose of this paragraph.
(2) Under regulations
Subject to such regulations as the Secretary may prescribe for the purpose of this paragraph, the Secretary may relieve the purchaser or the second purchaser, or both, from the requirement of registering under this section.
(3) Certain purchases and sales by the United States
Subsection (a) shall apply to purchases and sales by the United States only to the extent provided by regulations prescribed by the Secretary.
[(4) Repealed. Pub. L. 89–44, title II, §208(e), June 21, 1965, 79 Stat. 141 ]
(5) Supplies for vessels or aircraft
Subsection (a) shall not apply to a sale of an article for use by the purchaser as supplies for any vessel or aircraft if such purchaser complies with such regulations relating to the use of exemption certificates in lieu of registration as the Secretary shall prescribe to carry out the purpose of this paragraph.
(c) Denial, revocation, or suspension of registration
Under regulations prescribed by the Secretary, the registration of any person under this section may be denied, revoked, or suspended if the Secretary determines—
(1) that such person has used such registration to avoid the payment of any tax imposed by this chapter, or to postpone or in any manner to interfere with the collection of any such tax, or
(2) that such denial, revocation, or suspension is necessary to protect the revenue.
The denial, revocation, or suspension under this subsection shall be in addition to any penalty provided by law for any act or failure to act.
(d) Registration in the case of certain other exemptions
The provisions of this section may be extended to, and made applicable with respect to, the exemptions provided by sections 4053(6), 4064(b)(1)(C), 4101, and 4182(b), and the exemptions authorized under section 4293 in respect of the taxes imposed by this chapter, to the extent provided by regulations prescribed by the Secretary.
(e) Definitions
Terms used in this section which are defined in section 4221(d) shall have the meaning given to them by section 4221(d).
(Added
Editorial Notes
Prior Provisions
A prior section 4222, act Aug. 16, 1954, ch. 736,
Amendments
2014—Subsec. (d).
1998—Subsec. (d).
1997—Subsec. (b)(2).
1993—Subsec. (d).
1990—Subsec. (c).
Subsec. (d).
1988—Subsec. (d).
1984—Subsec. (d).
1983—Subsec. (d).
1978—Subsec. (d).
1976—Subsecs. (a) to (d).
1971—Subsec. (d).
1965—Subsec. (b)(4).
Subsec. (b)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by section 11212(b)(2) of
Amendment by section 11221(d)(3) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1978 Amendments
Amendment by section 201(e) of
"(1) The amendments made by subsections (a) and (f) [amending this section and
"(2) For purposes of paragraph (1), an article shall not be considered sold on or before the date of the enactment of this Act [Nov. 9, 1978] unless possession or right to possession passes to the purchaser on or before such date.
"(3) In the case of—
"(A) a lease,
"(B) a contract for the sale of an article providing that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,
"(C) a conditional sale, or
"(D) a chattel mortgage arrangement providing that the sale price shall be paid in installments,
entered into on or before the date of the enactment of this Act [Nov. 9, 1978], payments made after such date with respect to the article leased or sold shall, for purposes of this subsection, be considered as payments made with respect to an article sold after such date, if the lessor or vendor establishes that the amount of payments payable after such date with respect to such article has been reduced by an amount equal to that portion of the tax applicable with respect to the lease or sale of such article which is due and payable after such date. If the lessor or vendor does not establish that the payments have been so reduced, they shall be treated as payments made in respect of an article sold on or before the date of the enactment of this Act."
Amendment by
Effective Date of 1971 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by section 208(e) of
Amendment by section 802(c) of
§4223. Special rules relating to further manufacture
(a) Purchasing manufacturer to be treated as the manufacturer
For purposes of this chapter, a manufacturer or producer to whom an article is sold or resold free of tax under section 4221(a)(1) for use by him in further manufacture shall be treated as the manufacturer or producer of such article.
(b) Computation of tax
If the manufacturer or producer referred to in subsection (a) incurs liability for tax under this chapter on his sale or use of an article referred to in subsection (a) and the tax is based on the price for which the article is sold, the article shall be treated as having been sold by him—
(1) at the price for which the article was sold by him (or, where the tax is on his use of the article, at the price referred to in section 4218(c)); or
(2) if he so elects and establishes such price to the satisfaction of the Secretary—
(A) at the price for which the article was sold to him; or
(B) at the price for which the article was sold by the person who (without regard to subsection (a)) is the manufacturer, producer, or importer of such article.
For purposes of this subsection, the price for which the article was sold shall be determined as provided in section 4216. For purposes of paragraph (2) no adjustment or readjustment shall be made in such price by reason of any discount, rebate, allowance, return or repossession of a container or covering, or otherwise. An election under paragraph (2) shall be made in the return reporting the tax applicable to the sale or use of the article, and may not be revoked.
(Added
Editorial Notes
Prior Provisions
A prior section 4223, act Aug. 16, 1954, ch. 736,
Amendments
1984—Subsec. (b)(1).
1976—Subsec. (b)
1960—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1960 Amendment
Amendment by
[§4224. Repealed. Pub. L. 89–44, title I, §101(b)(5), June 21, 1965, 79 Stat. 136 ]
Section,
A prior section 4224, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable with respect to articles sold on or after June 22, 1965, see section 701(a) of
§4225. Exemption of articles manufactured or produced by Indians
No tax shall be imposed under this chapter on any article of native Indian handicraft manufactured or produced by Indians on Indian reservations, or in Indian schools, or by Indians under the jurisdiction of the United States Government in Alaska.
(Added
Editorial Notes
Prior Provisions
A prior section 4225, act Aug. 16, 1954, ch. 736,
Executive Documents
Admission of Alaska as State
Admission of Alaska into the Union was accomplished Jan. 3, 1959, on issuance of Proc. No. 3269, Jan. 3, 1959, 24 F.R. 81, 73 Stat. c16, as required by sections 1 and 8(c) of
[§4226. Repealed. Pub. L. 94–455, title XIX, §1904(a)(4), Oct. 4, 1976, 90 Stat. 1811 ]
Section, added June 29, 1956, ch. 462, title II, §207(a),
A prior
§4227. Cross reference
For exception for a sale to an Indian tribal government (or its subdivision) for the exclusive use of an Indian tribal government (or its subdivision), see section 7871.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1986—
1984—Par. (2).
1983—
1976—
1965—Par. (2).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
For effective date of amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
CHAPTER 33 —FACILITIES AND SERVICES
Repeal of Subchapter B
Table of subchapters for
Editorial Notes
Amendments
1970—
1965—
1962—
1958—
Statutory Notes and Related Subsidiaries
Effective Date of 1962 Amendment
1 Section numbers editorially supplied.
[Subchapter A—Repealed]
[§§4231 to 4234. Repealed. Pub. L. 89–44, title III, §301, June 21, 1965, 79 Stat. 145 ]
Section 4231, acts Aug. 16, 1954, ch. 736,
Section 4232, acts Aug. 16, 1954, ch. 736,
Section 4233, acts Aug. 16, 1954, ch. 736,
Section 4234, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable with respect to admissions, services, or uses after noon, December 31, 1965, see section 701(b)(1) of
[§§4241 to 4243. Repealed. Pub. L. 89–44, title III, §301, June 21, 1965, 79 Stat. 145 ]
Section 4241, acts Aug. 16, 1954, ch. 736,
Section 4242, act Aug. 16, 1954, ch. 736,
Section 4243, acts Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable with respect to dues and membership fees attributable to periods beginning on or after January 1, 1966, initiation fees and amounts paid for life memberships attributable to memberships beginning on or after January 1, 1966, initiation fees paid on or after July 1, 1965, to a new club or organization first making its facilities available to members on or after such a date, and, in the case of amounts described in
Subchapter B—Communications
Repeal
This subchapter, relating to the tax on communication, was repealed by
§4251. Imposition of tax
(a) Tax imposed
(1) In general
There is hereby imposed on amounts paid for communications services a tax equal to the applicable percentage of amounts so paid.
(2) Payment of tax
The tax imposed by this section shall be paid by the person paying for such services.
(b) Definitions
For purposes of subsection (a)—
(1) Communications services
The term "communications services" means—
(A) local telephone service;
(B) toll telephone service; and
(C) teletypewriter exchange service.
(2) Applicable percentage
The term "applicable percentage" means 3 percent.
(c) Special rule
For purposes of subsections (a) and (b), in the case of communications services rendered before November 1 of a calendar year for which a bill has not been rendered before the close of such year, a bill shall be treated as having been first rendered on December 31 of such year.
(d) Treatment of prepaid telephone cards
(1) In general
For purposes of this subchapter, in the case of communications services acquired by means of a prepaid telephone card—
(A) the face amount of such card shall be treated as the amount paid for such communications services, and
(B) that amount shall be treated as paid when the card is transferred by any telecommunications carrier to any person who is not such a carrier.
(2) Determination of face amount in absence of specified dollar amount
In the case of any prepaid telephone card which entitles the user other than to a specified dollar amount of use, the face amount shall be determined under regulations prescribed by the Secretary.
(3) Prepaid telephone card
For purposes of this subsection, the term "prepaid telephone card" means any card or any other similar arrangement which permits its holder to obtain communications services and pay for such services in advance.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Codification
This subchapter, relating to the tax on communications, was repealed by
Amendments
1998—Subsec. (d)(3).
1997—Subsec. (d).
1990—Subsec. (b)(2).
1987—Subsec. (b)(2).
| "With respect to amount paid pursuant to bills first rendered: | The percentage is: |
|---|---|
| During 1983, 1984, 1985, 1986, or 1987 | 3 |
| During 1988 or thereafter | 0." |
1986—Subsec. (b)(2).
1984—Subsec. (b)(2).
1982—Subsec. (a).
| "Amounts paid pursuant to bills first rendered— | Percent— |
|---|---|
| Before January 1, 1973 | 10 |
| During 1973 | 9 |
| During 1974 | 8 |
| During 1975 | 7 |
| During 1976 | 6 |
| During 1977 | 5 |
| During 1978 | 4 |
| During 1979 | 3 |
| During 1980 or 1981 | 2 |
| During 1982, 1983, or 1984 | 1" |
Subsec. (b).
1981—Subsec. (a)(2).
Subsec. (b).
1980—Subsec. (a)(2).
Subsec. (b).
1970—Subsec. (a)(2).
Subsec. (b).
1969—Subsec. (a)(2).
Subsec. (b).
1968—Subsec. (a)(2).
Subsec. (b).
Subsec. (c).
1966—Subsec. (a)(2).
Subsec. (c).
1965—Subsec. (a).
Subsec. (b).
Subsec. (c).
1964—Subsec. (b)(2).
1963—Subsec. (b)(2).
1962—Subsec. (b)(2).
1961—Subsec. (b)(2).
1960—Subsec. (b)(2).
1959—
1958—
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1982 Amendment
Effective Date of 1968 Amendments
Amendment by
Amendment by
Effective Date of 1966 Amendment
Effective Date of 1965 Amendment
Effective Date of 1958 Amendment
"(1) Subject to the provisions of paragraph (2), the amendment made by subsection (a) [amending this section and
"(2) The amendment made by subsection (a) [amending this section and
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4252. Definitions
(a) Local telephone service
For purposes of this subchapter, the term "local telephone service" means—
(1) the access to a local telephone system, and the privilege of telephonic quality communication with substantially all persons having telephone or radio telephone stations constituting a part of such local telephone system, and
(2) any facility or service provided in connection with a service described in paragraph (1).
The term "local telephone service" does not include any service which is a "toll telephone service" or a "private communication service" as defined in subsections (b) and (d).
(b) Toll telephone service
For purposes of this subchapter, the term "toll telephone service" means—
(1) a telephonic quality communication for which (A) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and (B) the charge is paid within the United States, and
(2) a service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located.
(c) Teletypewriter exchange service
For purposes of this subchapter, the term "teletypewriter exchange service" means the access from a teletypewriter or other data station to the teletypewriter exchange system of which such station is a part, and the privilege of intercommunication by such station with substantially all persons having teletypewriter or other data stations constituting a part of the same teletypewriter exchange system, to which the subscriber is entitled upon payment of a charge or charges (whether such charge or charges are determined as a flat periodic amount, on the basis of distance and elapsed transmission time, or in some other manner). The term "teletypewriter exchange service" does not include any service which is "local telephone service" as defined in subsection (a).
(d) Private communication service
For purposes of this subchapter, the term "private communication service" means—
(1) the communication service furnished to a subscriber which entitles the subscriber—
(A) to exclusive or priority use of any communication channel or groups of channels, or
(B) to the use of an intercommunication system for the subscriber's stations,
regardless of whether such channel, groups of channels, or intercommunication system may be connected through switching with a service described in subsection (a), (b), or (c),
(2) switching capacity, extension lines and stations, or other associated services which are provided in connection with, and are necessary or unique to the use of, channels or systems described in paragraph (1), and
(3) the channel mileage which connects a telephone station located outside a local telephone system area with a central office in such local telephone system,
except that such term does not include any communication service unless a separate charge is made for such service.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Codification
This subchapter, relating to the tax on communications was repealed by
Amendments
1965—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsecs. (e), (f).
1962—Subsec. (e)(1), (2).
1958—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 1965 Amendment
Amendment by
Effective Date of 1962 Amendment
Effective Date of 1958 Amendment
For effective date of amendment made by
§4253. Exemptions
(a) Certain coin-operated service
Service paid for by inserting coins in coin-operated telephones available to the public shall not be subject to the tax imposed by section 4251 with respect to local telephone service, or with respect to toll telephone service if the charge for such toll telephone service is less than 25 cents; except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be subject to the tax.
(b) News services
No tax shall be imposed under section 4251, except with respect to local telephone service, on any payment received from any person for services used in the collection of news for the public press, or a news ticker service furnishing a general news service similar to that of the public press, or radio broadcasting, or in the dissemination of news through the public press, or a news ticker service furnishing a general news service similar to that of the public press, or by means of radio broadcasting, if the charge for such service is billed in writing to such person.
(c) International, etc., organizations
No tax shall be imposed under section 4251 on any payment received for services furnished to an international organization, or to the American National Red Cross.
(d) Servicemen in combat zone
No tax shall be imposed under section 4251 on any payment received for any toll telephone service which originates within a combat zone, as defined in section 112, from a member of the Armed Forces of the United States performing service in such combat zone, as determined under such section, provided a certificate, setting forth such facts as the Secretary may by regulations prescribe, is furnished to the person receiving such payment.
(e) Items otherwise taxed
Only one payment of tax under section 4251 shall be required with respect to the tax on any service, notwithstanding the lines or stations of one or more persons are used in furnishing such service.
(f) Common carriers and communications companies
No tax shall be imposed under section 4251 on the amount paid for any toll telephone service described in section 4252(b)(2) to the extent that the amount so paid is for use by a common carrier, telephone or telegraph company, or radio broadcasting station or network in the conduct of its business as such.
(g) Installation charges
No tax shall be imposed under section 4251 on so much of any amount paid for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment as is properly attributable to such installation.
(h) Nonprofit hospitals
No tax shall be imposed under section 4251 on any amount paid by a nonprofit hospital for services furnished to such organization. For purposes of this subsection, the term "nonprofit hospital" means a hospital referred to in section 170(b)(1)(A)(iii) which is exempt from income tax under section 501(a).
(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 for 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 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.
(k) Exemption for qualified blood collector organizations
Under regulations provided by the Secretary, no tax shall be imposed under section 4251 on any amount paid by a qualified blood collector organization (as defined in section 7701(a)(49)) for services or facilities furnished to such organization.
(l) Filing of exemption certificates
(1) In general
In order to claim an exemption under subsection (c), (h), (i), (j), or (k), a person shall provide to the provider of communications services a statement (in such form and manner as the Secretary may provide) certifying that such person is entitled to such exemption.
(2) Duration of certificate
Any statement provided under paragraph (1) shall remain in effect until—
(A) the provider of communications services has actual knowledge that the information provided in such statement is false, or
(B) such provider is notified by the Secretary that the provider of the statement is no longer entitled to an exemption described in paragraph (1).
If any information provided in such statement is no longer accurate, the person providing such statement shall inform the provider of communications services within 30 days of any change of information.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Codification
Section 1207(c) of
This subchapter, relating to the tax on communications, was repealed by
Amendments
2006—Subsec. (k).
Subsec. (l).
Subsec. (l)(1).
1990—Subsec. (k).
1976—Subsec. (d).
Subsecs. (i), (j).
1969—Subsec. (h).
1966—Subsec. (h).
1965—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Subsecs. (h) to (j).
1962—Subsec. (j).
1959—Subsec. (f).
1958—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Subsecs. (g) to (i).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1990 Amendment
"(A)
"(B)
Effective Date of 1976 Amendment
Amendment by section 1904(a)(6) of
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Effective Date of 1962 Amendment
Amendment by
Effective Date of 1959 Amendment
"(1) Subject to the provisions of paragraph (2), the amendment made by subsection (a) [amending this section] shall apply with respect to amounts paid on or after January 1, 1959, for services rendered on or after such date.
"(2) The amendment made by subsection (a) [amending this section] shall not apply with respect to amounts paid pursuant to bills rendered before January 1, 1959. In the case of amounts paid pursuant to bills rendered on or after such date for services for which no bill was rendered before such date, such amendment shall apply except with respect to such services as were rendered more than 2 months before such date. In the case of services rendered more than 2 months before such date, the provisions of subchapter B of
Effective Date of 1958 Amendment
For effective date of amendment made by
§4254. Computation of tax
(a) General rule
If a bill is rendered the taxpayer for local telephone service or toll telephone service—
(1) the amount on which the tax with respect to such services shall be based shall be the sum of all charges for such services included in the bill; except that
(2) if the person who renders the bill groups individual items for purposes of rendering the bill and computing the tax, then (A) the amount on which the tax with respect to each such group shall be based shall be the sum of all items within that group, and (B) the tax on the remaining items not included in any such group shall be based on the charge for each item separately.
(b) Where payment is made for toll telephone service in coin-operated telephones
If the tax imposed by section 4251 with respect to toll telephone service is paid by inserting coins in coin-operated telephones, tax shall be computed to the nearest multiple of 5 cents, except that, where the tax is midway between multiples of 5 cents, the next higher multiple shall apply.
(c) Certain State and local taxes not included
For purposes of this subchapter, in determining the amounts paid for communications services, there shall not be included the amount of any State or local tax imposed on the furnishing or sale of such services, if the amount of such tax is separately stated in the bill.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Codification
This subchapter, relating to the tax on communications was repealed by
Amendments
1977—Subsec. (c).
1965—Subsec. (a).
Subsec. (b).
1958—Subsec. (a).
Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 1977 Amendment
Effective Date of 1965 Amendment
Amendment by
Effective Date of 1958 Amendment
For effective date of amendment made by
Subchapter C—Transportation by Air
Editorial Notes
Amendments
2018—
PART I—PERSONS
Editorial Notes
Amendments
1970—
1962—
1958—
1956—Act July 25, 1956, ch. 725, §5,
§4261. Imposition of tax
(a) In general
There is hereby imposed on the amount paid for taxable transportation of any person a tax equal to 7.5 percent of the amount so paid.
(b) Domestic segments of taxable transportation
(1) In general
There is hereby imposed on the amount paid for each domestic segment of taxable transportation by air a tax in the amount of $3.00.
(2) Domestic segment
For purposes of this section, the term "domestic segment" means any segment consisting of 1 takeoff and 1 landing and which is taxable transportation described in section 4262(a)(1).
(3) Changes in segments by reason of rerouting
If—
(A) transportation is purchased between 2 locations on specified flights, and
(B) there is a change in the route taken between such 2 locations which changes the number of domestic segments, but there is no change in the amount charged for such transportation,
the tax imposed by paragraph (1) shall be determined without regard to such change in route.
(c) Use of international travel facilities
(1) In general
There is hereby imposed a tax of $12.00 on any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins or ends in the United States.
(2) Exception for transportation entirely taxable under subsection (a)
This subsection shall not apply to any transportation all of which is taxable under subsection (a) (determined without regard to sections 4281 and 4282).
(3) Special rule for Alaska and Hawaii
In any case in which the tax imposed by paragraph (1) applies to a domestic segment beginning or ending in Alaska or Hawaii, such tax shall apply only to departures and shall be at the rate of $6.
(d) By whom paid
Except as provided in section 4263(a), the taxes imposed by this section shall be paid by the person making the payment subject to the tax.
(e) Special rules
(1) Segments to and from rural airports
(A) Exception from segment tax
The tax imposed by subsection (b)(1) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).
(B) Rural airport
For purposes of this paragraph, the term "rural airport" means, with respect to any calendar year, any airport if—
(i) there were fewer than 100,000 commercial passengers departing by air (in the case of any airport described in clause (ii)(III), on flight segments of at least 100 miles) during the second preceding calendar year from such airport, and
(ii) such airport—
(I) is not located within 75 miles of another airport which is not described in clause (i),
(II) is receiving essential air service subsidies as of the date of the enactment of this paragraph, or
(III) is not connected by paved roads to another airport.
(2) Amounts paid outside the United States
In the case of amounts paid outside the United States for taxable transportation, the taxes imposed by subsections (a) and (b) shall apply only if such transportation begins and ends in the United States.
(3) Amounts paid for right to award free or reduced rate air transportation
(A) In general
Any amount paid (and the value of any other benefit provided) to an air carrier (or any related person) for the right to provide mileage awards for (or other reductions in the cost of) any transportation of persons by air shall be treated for purposes of subsection (a) as an amount paid for taxable transportation, and such amount shall be taxable under subsection (a) without regard to any other provision of this subchapter.
(B) Controlled group
For purposes of subparagraph (A), a corporation and all wholly owned subsidiaries of such corporation shall be treated as 1 corporation.
(C) Regulations
The Secretary shall prescribe rules which reallocate items of income, deduction, credit, exclusion, or other allowance to the extent necessary to prevent the avoidance of tax imposed by reason of this paragraph. The Secretary may prescribe rules which exclude from the tax imposed by subsection (a) amounts attributable to mileage awards which are used other than for transportation of persons by air.
(4) Inflation adjustment of dollar rates of tax
(A) In general
In the case of taxable events in a calendar year after the last nonindexed year, the $3.00 amount contained in subsection (b) and each dollar amount contained in subsection (c) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for "calendar year 2016" in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of 10 cents, such increase shall be rounded to the nearest multiple of 10 cents.
(B) Last nonindexed year
For purposes of subparagraph (A), the last nonindexed year is—
(i) 2002 in the case of the $3.00 amount contained in subsection (b), and
(ii) 1998 in the case of the dollar amounts contained in subsection (c).
(C) Taxable event
For purposes of subparagraph (A), in the case of the tax imposed by subsection (b), the beginning of the domestic segment shall be treated as the taxable event.
(D) Special rule for amounts paid for domestic segments beginning after 2002
If an amount is paid during a calendar year for a domestic segment beginning in a later calendar year, then the rate of tax under subsection (b) on such amount shall be the rate in effect for the calendar year in which such amount is paid.
(5) Amounts paid for aircraft management services
(A) In general
No tax shall be imposed by this section or section 4271 on any amounts paid by an aircraft owner for aircraft management services related to—
(i) maintenance and support of the aircraft owner's aircraft, or
(ii) flights on the aircraft owner's aircraft.
(B) Aircraft management services
For purposes of subparagraph (A), the term "aircraft management services" includes—
(i) assisting an aircraft owner with administrative and support services, such as scheduling, flight planning, and weather forecasting,
(ii) obtaining insurance,
(iii) maintenance, storage and fueling of aircraft,
(iv) hiring, training, and provision of pilots and crew,
(v) establishing and complying with safety standards, and
(vi) such other services as are necessary to support flights operated by an aircraft owner.
(C) Lessee treated as aircraft owner
(i) In general
For purposes of this paragraph, the term "aircraft owner" includes a person who leases the aircraft other than under a disqualified lease.
(ii) Disqualified lease
For purposes of clause (i), the term "disqualified lease" means a lease from a person providing aircraft management services with respect to such aircraft (or a related person (within the meaning of section 465(b)(3)(C)) to the person providing such services), if such lease is for a term of 31 days or less.
(D) Pro rata allocation
In the case of amounts paid to any person which (but for this subsection) are subject to the tax imposed by subsection (a), a portion of which consists of amounts described in subparagraph (A), this paragraph shall apply on a pro rata basis only to the portion which consists of amounts described in such subparagraph.
(f) Exemption for certain uses
No tax shall be imposed under subsection (a) or (b) on air transportation—
(1) by helicopter for the purpose of transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas, or
(2) by helicopter or by fixed-wing aircraft for the purpose of the planting, cultivation, cutting, or transportation of, or caring for, trees (including logging operations),
but only if the helicopter or fixed-wing aircraft does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of
(g) Exemption for air ambulances providing certain emergency medical transportation
No tax shall be imposed under this section or section 4271 on any air transportation for the purpose of providing emergency medical services—
(1) by helicopter, or
(2) by a fixed-wing aircraft equipped for and exclusively dedicated on that flight to acute care emergency medical services.
(h) Exemption for skydiving uses
No tax shall be imposed by this section or section 4271 on any air transportation exclusively for the purpose of skydiving.
(i) Exemption for seaplanes
No tax shall be imposed by this section or section 4271 on any air transportation by a seaplane with respect to any segment consisting of a takeoff from, and a landing on, water, but only if the places at which such takeoff and landing occur have not received and are not receiving financial assistance from the Airport and Airways Trust Fund.
(j) Exemption for aircraft in fractional ownership aircraft programs
No tax shall be imposed by this section or section 4271 on any air transportation if tax is imposed under section 4043 with respect to the fuel used in such transportation. This subsection shall not apply after May 10, 2024.
(k) Application of taxes
(1) In general
The taxes imposed by this section shall apply to—
(A) transportation beginning during the period—
(i) beginning on the 7th day after the date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, and
(ii) ending on May 10, 2024, and
(B) amounts paid during such period for transportation beginning after such period.
(2) Refunds
If, as of the date any transportation begins, the taxes imposed by this section would not have applied to such transportation if paid for on such date, any tax paid under paragraph (1)(B) with respect to such transportation shall be treated as an overpayment.
(Aug. 16, 1954, ch. 736,
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The date of the enactment of this paragraph, referred to in subsec. (e)(1)(B)(ii)(II), is the date of enactment of
The Airport and Airway Development Act of 1970, referred to in subsec. (f), is title I of
The date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, referred to in subsec. (k)(1)(A)(i), is the date of enactment of
Amendments
2024—Subsec. (j).
Subsec. (k)(1)(A)(ii).
2023—Subsec. (j).
Subsec. (k)(1)(A)(ii).
2018—Subsec. (b)(1).
Subsec. (j).
Subsec. (k)(1)(A)(ii).
2017—Subsec. (e)(4)(A)(ii).
Subsec. (e)(5).
Subsec. (j).
Subsec. (k)(1)(A)(ii).
2016—Subsec. (j).
Subsec. (k)(1)(A)(ii).
2015—Subsec. (j).
Subsec. (k)(1)(A)(ii).
2014—Subsec. (e)(1)(C).
Subsec. (e)(5).
2012—Subsec. (j).
Subsec. (j)(1)(A)(ii).
Subsec. (k).
2011—Subsec. (j)(1)(A)(ii).
2010—Subsec. (j)(1)(A)(ii).
2009—Subsec. (j)(1)(A)(ii).
2008—Subsec. (j)(1)(A)(ii).
2007—Subsec. (j)(1)(A)(ii).
2005—Subsec. (e)(1)(B)(i).
Subsec. (e)(1)(B)(ii)(III).
Subsec. (e)(4)(C).
Subsec. (f).
"(1) transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas, or
"(2) the planting, cultivation, cutting, or transportation of, or caring for, trees (including logging operations),
but only if the helicopter does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of
Subsecs. (i), (j).
2003—Subsec. (e)(4)(D).
1997—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsecs. (e), (f).
Subsec. (g).
Subsec. (g)(1)(A)(ii).
Subsec. (g)(2).
Subsec. (h).
Subsec. (i).
1996—Subsec. (e).
Subsec. (f).
"(f)
"(1) does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970 during such transportation, and
"(2) does not otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of
Subsec. (g).
1994—Subsecs. (e), (f)(2).
1990—Subsecs. (a), (b).
Subsec. (g).
1989—Subsec. (c).
1987—Subsec. (e).
Subsec. (f).
Subsec. (g).
1986—Subsec. (e)(1).
"(A) the exploration for, or the development or removal of, hard minerals, or
"(B) the exploration for oil or gas, or".
1984—Subsec. (e)(1).
1982—Subsec. (e).
Subsec. (f).
1980—Subsec. (e).
1976—Subsec. (a).
Subsec. (b).
Subsec. (c).
1970—Subsec. (a).
Subsec. (b).
Subsecs. (c), (d).
Subsec. (e).
1965—
1964—
1963—
1962—Subsecs. (a), (b).
Subsec. (c).
1961—
1960—
1959—
1956—Subsec. (a). Act July 25, 1956, §1, substituted "taxable transportation (as defined in section 4262) of any person by rail, motor vehicle, water, or air a tax" for "the transportation of persons by rail, motor vehicle, water, or air within or without the United States a tax".
Subsec. (b). Act July 25, 1956, §1, substituted "taxable transportation (as defined in section 4262) of any person by rail, motor vehicle, water, or air, but only if such transportation begins and ends in the United States" for "transportation of persons by rail, motor vehicle, water, or air which begins and ends in the United States".
Subsec. (d). Act July 25, 1956, §4(b), substituted "Except as provided in section 4264, the" for "The".
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(FF) of
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2012 Amendment
Amendment by section 1101(b)(1) of
Amendment by
Effective Date of 2011 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2010 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by
Amendment by
Amendment by
Effective Date of 2008 Amendment
Amendment by
Amendment by
Amendment by
Effective Date of 2007 Amendment
Amendment by
Effective Date of 2005 Amendment
Amendment by section 11123(a) of
Effective Date of 2003 Amendment
Effective Date of 1997 Amendments
"(A)
"(B)
"(i) the amendment made to section 4261(c) of the Internal Revenue Code of 1986 shall apply to amounts paid more than 7 days after the date of the enactment of this Act [Aug. 5, 1997] for transportation beginning on or after October 1, 1997, and
"(ii) the amendment made to section 4263(c) of such Code shall apply to the extent related to taxes imposed under the amendment made to such section 4261(c) on the amounts described in clause (i).
"(C)
"(i)
"(ii)
Amendment by section 1601(f)(4)(D) of
"(A)
"(B)
"(C)
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
Effective Date of 1989 Amendment
Effective Date of 1987 Amendment
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Effective Date of 1982 Amendment
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
Effective Date of 1962 Amendment
Effective Date of 1956 Amendment
Act July 25, 1956, ch. 725, §6,
Savings Provision
For provisions that nothing in amendment by section 401(b)(42) of
Delayed Deposits of Airport Trust Fund Tax Revenues
Due date for deposits of taxes imposed by this section which would be required to be made after Aug. 14, 1997, and before Oct. 1, 1997, to be Oct. 10, 1997, and due date for deposits of taxes imposed by this section which would be required to be made after Aug. 14, 1998, and before Oct. 1, 1998, to be Oct. 5, 1998, see section 1031(g) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Inflation Adjusted Items for Certain Years
Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2011—Internal Revenue News Release IR 2010–129, Dec. 29, 2010.
2010—Internal Revenue News Release IR 2009–120, Dec. 23, 2009.
§4262. Definition of taxable transportation
(a) Taxable transportation; in general
For purposes of this part, except as provided in subsection (b), the term "taxable transportation" means—
(1) transportation by air which begins in the United States or in the 225–mile zone and ends in the United States or in the 225–mile zone; and
(2) in the case of transportation by air other than transportation described in paragraph (1), that portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such portion is not a part of uninterrupted international air transportation (within the meaning of subsection (c)(3)).
(b) Exclusion of certain travel
For purposes of this part, the term "taxable transportation" does not include that portion of any transportation by air which meets all 4 of the following requirements:
(1) such portion is outside the United States;
(2) neither such portion nor any segment thereof is directly or indirectly—
(A) between (i) a point where the route of the transportation leaves or enters the continental United States, or (ii) a port or station in the 225-mile zone, and
(B) a port or station in the 225-mile zone;
(3) such portion—
(A) begins at either (i) the point where the route of the transportation leaves the United States, or (ii) a port or station in the 225-mile zone, and
(B) ends at either (i) the point where the route of the transportation enters the United States, or (ii) a port or station in the 225-mile zone; and
(4) a direct line from the point (or the port or station) specified in paragraph (3)(A), to the point (or the port or station) specified in paragraph (3)(B), passes through or over a point which is not within 225 miles of the United States.
(c) Definitions
For purposes of this section—
(1) Continental United States
The term "continental United States" means the District of Columbia and the States other than Alaska and Hawaii.
(2) 225-mile zone
The term "225-mile zone" means that portion of Canada and Mexico which is not more than 225 miles from the nearest point in the continental United States.
(3) Uninterrupted international air transportation
The term "uninterrupted international air transportation" means any transportation by air which is not transportation described in subsection (a)(1) and in which—
(A) the scheduled interval between (i) the beginning or end of the portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States and (ii) the end or beginning of the other portion of such transportation is not more than 12 hours, and
(B) the scheduled interval between the beginning or end and the end or beginning of any two segments of the portion of such transportation referred to in subparagraph (A)(i) is not more than 12 hours.
For purposes of this paragraph, in the case of personnel of the United States Army, Air Force, Navy, Marine Corps, and Coast Guard traveling in uniform at their own expense when on official leave, furlough, or pass, the scheduled interval described in subparagraph (A) shall be deemed to be not more than 12 hours if a ticket for the subsequent portion of such transportation is purchased within 12 hours after the end of the earlier portion of such transportation and the purchaser accepts and utilizes the first accommodations actually available to him for such subsequent portion.
(d) Transportation
For purposes of this part, the term "transportation" includes layover or waiting time and movement of the aircraft in deadhead service.
(e) Authority to waive 225-mile zone provisions
(1) In general
If the Secretary of the Treasury determines that Canada or Mexico has entered into a qualified agreement—
(A) the Secretary shall publish a notice of such determination in the Federal Register, and
(B) effective with respect to transportation beginning after the date specified in such notice, to the extent provided in the agreement, the term "225-mile zone" shall not include part or all of the country with respect to which such determination is made.
(2) Termination of waiver
If a determination was made under paragraph (1) with respect to any country and the Secretary of the Treasury subsequently determines that the agreement is no longer in effect or that the agreement is no longer a qualified agreement—
(A) the Secretary shall publish a notice of such determination in the Federal Register, and
(B) subparagraph (B) of paragraph (1) shall cease to apply with respect to transportation beginning after the date specified in such notice.
(3) Qualified agreement
For purposes of this subsection, the term "qualified agreement" means an agreement between the United States and Canada or Mexico (as the case may be)—
(A) setting forth that portion of such country which is not to be treated as within the 225-mile zone, and
(B) providing that the tax imposed by such country on transportation described in subparagraph (A) will be at a level which the Secretary of the Treasury determines to be appropriate.
(4) Requirement that agreement be submitted to Congress
No notice may be published under paragraph (1)(A) with respect to any qualified agreement before the date 90 days after the date on which a copy of such agreement was furnished to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate.
(Added July 25, 1956, ch. 725, §3,
Editorial Notes
Prior Provisions
A prior section 4262 was renumbered 4263 of this title and later repealed.
Amendments
1982—Subsec. (c)(3).
Subsec. (e).
1970—Subsec. (a).
Subsec. (b).
Subsec. (d).
1965—Subsec. (c)(4).
1962—Subsec. (a).
Subsec. (b).
Subsec. (c)(3).
1960—Subsec. (c)(1).
1959—Subsec. (c)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1982 Amendment
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
Effective Date of 1962 Amendment
Effective Date of 1960 Amendment
Amendment by
Effective Date of 1959 Amendment
Amendment by
Effective Date
Section applicable to amounts paid on or after first day of first month which begins more than sixty days after July 25, 1956, for transportation commencing on or after such first day, see section 6 of act July 25, 1956, set out as an Effective Date of 1956 Amendment note under
Transfer of Functions
For transfer of authorities, functions, personnel, and assets of the Coast Guard, including the authorities and functions of the Secretary of Transportation relating thereto, to the Department of Homeland Security, and for treatment of related references, see
§4263. Special rules
(a) Payments made outside the United States for prepaid orders
If the payment upon which tax is imposed by section 4261 is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation pursuant to such order shall collect the amount of the tax.
(b) Tax deducted upon refunds
Every person who refunds any amount with respect to a ticket or order which was purchased without payment of the tax imposed by section 4261 shall deduct from the amount refundable, to the extent available, any tax due under such section as a result of the use of a portion of the transportation purchased in connection with such ticket or order, and shall report to the Secretary the amount of any such tax remaining uncollected.
(c) Payment of tax
Where any tax imposed by section 4261 is not paid at the time payment for transportation is made, then, under regulations prescribed by the Secretary, to the extent that such tax is not collected under any other provision of this subchapter, such tax shall be paid by the carrier providing the initial segment of such transportation which begins or ends in the United States.
(d) Application of tax
The tax imposed by section 4261 shall apply to any amount paid within the United States for transportation of any person by air unless the taxpayer establishes, pursuant to regulations prescribed by the Secretary, at the time of payment for the transportation, that the transportation is not transportation in respect of which tax is imposed by section 4261.
(e) Round trips
In applying this subchapter to a round trip, such round trip shall be considered to consist of transportation from the point of departure to the destination, and of separate transportation thereafter.
(f) Transportation outside the northern portion of the Western Hemisphere
In applying this subchapter to transportation any part of which is outside the northern portion of the Western Hemisphere, if the route of such transportation leaves and reenters the northern portion of the Western Hemisphere, such transportation shall be considered to consist of transportation to a point outside such northern portion, and of separate transportation thereafter. For purposes of this subsection, the term "northern portion of the Western Hemisphere" means the area lying west of the 30th meridian west of Greenwich, east of the international dateline, and north of the Equator, but not including any country of South America.
(Added July 25, 1956, ch. 725, §4(a),
Editorial Notes
Prior Provisions
A prior section 4263, acts Aug. 16, 1954, ch. 736,
Amendments
1997—Subsec. (c).
"(1) such tax shall be paid by the person paying for the transportation or by the person using the transportation;
"(2) such tax shall be paid within such time as the Secretary shall prescribe by regulations after whichever of the following first occurs:
"(A) the rights to the transportation expire; or
"(B) the time when the transportation becomes subject to tax; and
"(3) payment of such tax shall be made to the Secretary, to the person to whom the payment for transportation was made, or, in the case of transportation other than transportation described in section 4262(a)(1), to any person furnishing any portion of such transportation."
1976—Subsecs. (b) to (d).
1962—Subsec. (c)(3).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1962 Amendment
Effective Date
Section applicable to amounts paid on or after first day of first month which begins more than sixty days after July 25, 1956, for transportation commencing on or after such first day, see section 6 of act July 25, 1956, set out as an Effective Date of 1956 Amendment note under
PART II—PROPERTY
Editorial Notes
Amendments
1970—
§4271. Imposition of tax
(a) In general
There is hereby imposed upon the amount paid within or without the United States for the taxable transportation (as defined in section 4272) of property a tax equal to 6.25 percent of the amount so paid for such transportation. The tax imposed by this subsection shall apply only to amounts paid to a person engaged in the business of transporting property by air for hire.
(b) By whom paid
(1) In general
Except as provided by paragraph (2), the tax imposed by subsection (a) shall be paid by the person making the payment subject to tax.
(2) Payments made outside the United States
If a payment subject to tax under subsection (a) is made outside the United States and the person making such payment does not pay such tax, such tax—
(A) shall be paid by the person to whom the property is delivered in the United States by the person furnishing the last segment of the taxable transportation in respect of which such tax is imposed, and
(B) shall be collected by the person furnishing the last segment of such taxable transportation.
(c) Determination of amounts paid in certain cases
For purposes of this section, in any case in which a person engaged in the business of transporting property by air for hire and one or more other persons not so engaged jointly provide services which include taxable transportation of property, and the person so engaged receives, for the furnishing of such taxable transportation, a portion of the receipts from the joint providing of such services, the amount paid for the taxable transportation shall be treated as being the sum of (1) the portion of the receipts so received, and (2) any expenses incurred by any of the persons not so engaged which are properly attributable to such taxable transportation and which are taken into account in determining the portion of the receipts so received.
(d) Application of tax
(1) In general
The tax imposed by subsection (a) shall apply to—
(A) transportation beginning during the period—
(i) beginning on the 7th day after the date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, and
(ii) ending on May 10, 2024, and
(B) amounts paid during such period for transportation beginning after such period.
(2) Refunds
If, as of the date any transportation begins, the taxes imposed by this section would not have applied to such transportation if paid for on such date, any tax paid under paragraph (1)(B) with respect to such transportation shall be treated as an overpayment.
(Added
Editorial Notes
References in Text
The date of the enactment of the Airport and Airway Trust Fund Tax Reinstatement Act of 1997, referred to in subsec. (d)(1)(A)(i), is the date of enactment of
Prior Provisions
A prior section 4271, act Aug. 16, 1954, ch. 736,
Amendments
2024—Subsec. (d)(1)(A)(ii).
2023—Subsec. (d)(1)(A)(ii).
2018—Subsec. (d)(1)(A)(ii).
2017—Subsec. (d)(1)(A)(ii).
2016—Subsec. (d)(1)(A)(ii).
2015—Subsec. (d)(1)(A)(ii).
2012—Subsec. (d)(1)(A)(ii).
2011—Subsec. (d)(1)(A)(ii).
2010—Subsec. (d)(1)(A)(ii).
2009—Subsec. (d)(1)(A)(ii).
2008—Subsec. (d)(1)(A)(ii).
2007—Subsec. (d)(1)(A)(ii).
1997—Subsec. (d).
Subsec. (d)(1)(A)(ii).
1996—Subsec. (d).
1990—Subsec. (a).
Subsec. (d).
1987—Subsec. (d).
1982—Subsec. (d).
1980—Subsec. (d).
1976—Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 2012 Amendment
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2010 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by
Amendment by
Amendment by
Effective Date of 2008 Amendment
Amendment by
Amendment by
Amendment by
Effective Date of 2007 Amendment
Amendment by
Effective Date of 1997 Amendments
Amendment by
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by section 11213(a)(2) of
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date
Section applicable to transportation beginning after June 30, 1970, see section 211(b) of
Delayed Deposits of Airport Trust Fund Tax Revenues
Due date for deposits of taxes imposed by this section which would be required to be made after July 31, 1998, and before Oct. 1, 1998, to be Oct. 5, 1998, see section 1031(g) of
§4272. Definition of taxable transportation, etc.
(a) In general
For purposes of this part, except as provided in subsection (b), the term "taxable transportation" means transportation by air which begins and ends in the United States.
(b) Exceptions
For purposes of this part, the term "taxable transportation" does not include—
(1) that portion of any transportation which meets the requirements of paragraphs (1), (2), (3), and (4) of section 4262(b), or
(2) under regulations prescribed by the Secretary, transportation of property in the course of exportation (including shipment to a possession of the United States) by continuous movement, and in due course so exported.
(c) Excess baggage of passengers
For purposes of this part, the term "property" does not include excess baggage accompanying a passenger traveling on an aircraft operated on an established line.
(d) Transportation
For purposes of this part, the term "transportation" includes layover or waiting time and movement of the aircraft in deadhead service.
(Added
Editorial Notes
Prior Provisions
Prior sections 4272 and 4273 were repealed by
Section 4272, act Aug. 16, 1954, ch. 736,
Section 4273, act Aug. 16, 1954, ch. 736,
Amendments
1976—Subsec. (b)(2).
PART III—SPECIAL PROVISIONS APPLICABLE TO TAXES ON TRANSPORTATION BY AIR
Editorial Notes
Amendments
1990—
1987—
1970—
§4281. Small aircraft on nonestablished lines
(a) In general
The taxes imposed by sections 4261 and 4271 shall not apply to transportation by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less, except when such aircraft is operated on an established line or when such aircraft is a jet aircraft.
(b) Maximum certificated takeoff weight
For purposes of this section, the term "maximum certificated takeoff weight" means the maximum such weight contained in the type certificate or airworthiness certificate.
(c) Sightseeing
For purposes of this section, an aircraft shall not be considered as operated on an established line at any time during which such aircraft is being operated on a flight the sole purpose of which is sightseeing.
(d) Jet aircraft
For purposes of this section, the term "jet aircraft" shall not include any aircraft which is a rotorcraft or propeller aircraft.
(Added
Editorial Notes
Prior Provisions
A prior section 4281, act Aug. 16, 1954, ch. 736,
Amendments
2014—
2012—
2005—
1982—
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Effective Date of 2012 Amendment
Effective Date of 2005 Amendment
Effective Date of 1982 Amendment
Amendment by
Effective Date
Section effective on July 1, 1970, see section 211(a) of
§4282. Transportation by air for other members of affiliated group
(a) General rule
Under regulations prescribed by the Secretary, if—
(1) one member of an affiliated group is the owner or lessee of an aircraft, and
(2) such aircraft is not available for hire by persons who are not members of such group,
no tax shall be imposed under section 4261 or 4271 upon any payment received by one member of the affiliated group from another member of such group for services furnished to such other member in connection with the use of such aircraft.
(b) Availability for hire
For purposes of subsection (a), the determination of whether an aircraft is available for hire by persons who are not members of an affiliated group shall be made on a flight-by-flight basis.
(c) Affiliated group
For purposes of subsection (a), the term "affiliated group" has the meaning assigned to such term by section 1504(a), except that all corporations shall be treated as includible corporations (without any exclusion under section 1504(b)).
(Added
Editorial Notes
Prior Provisions
A prior section 4282, act Aug. 16, 1954, ch. 736,
Amendments
1996—Subsecs. (b), (c).
1976—Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 1996 Amendment
Amendment by
[§4283. Repealed. Pub. L. 101–508, title XI, §11213(e)(1), Nov. 5, 1990, 104 Stat. 1388–436 ]
Section, added
[Subchapter D—Repealed]
[§§4286, 4287. Repealed. Pub. L. 89–44, title III, §304, June 21, 1965, 79 Stat. 148 ]
Section 4286, act Aug. 16, 1954, ch. 736,
Section 4287, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Subchapter E—Special Provisions Applicable to Services and Facilities Taxes
Editorial Notes
Amendments
1976—
1958—
§4291. Cases where persons receiving payment must collect tax
Except as otherwise provided in section 4263(a), every person receiving any payment for facilities or services on which a tax is imposed upon the payor thereof under this chapter shall collect the amount of the tax from the person making such payment.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1970—
1965—
1958—
1956—Act July 25, 1956, inserted "Except as provided in section 4264(a)", and struck out provisions which related to collection of tax where payment specified in section 4261 was made outside the United States for a prepaid order, exchange order, or similar order.
Statutory Notes and Related Subsidiaries
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
"(A) The amendments made by sections 301 and 305 [repealing
"(B) The amendments made by sections 301 and 305 insofar as they relate to the taxes imposed by section 4241 of the Code, shall apply with respect to—
"(i) dues and membership fees attributable to periods beginning on or after January 1, 1966;
"(ii) initiation fees (other than initiation fees to which clause (iii) applies) and amounts paid for life memberships attributable to memberships beginning on or after January 1, 1966;
"(iii) initiation fees paid on or after July 1, 1965, to a new club or organization which first makes its facilities available to members on or after such date; and
"(iv) in the case of amounts described in section 4243(b) of the Code, 3-year periods beginning on or after January 1, 1966."
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1956 Amendment
Amendment by act July 25, 1956, applicable to amounts paid on or after first day of first month which begins more than sixty days after July 25, 1956, for transportation commencing on or after such first day, see section 6 of act July 25, 1956, set out as a note under
[§4292. Repealed. Pub. L. 94–455, title XIX, §1904(a)(9), Oct. 4, 1976, 90 Stat. 1812 ]
Section, acts Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1904(d) of
§4293. Exemption for United States and possessions
The Secretary of the Treasury may authorize exemption from the taxes imposed by section 4041, section 4051,
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2014—
1990—
1988—
1978—
1976—
1970—
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Effective Date of 1978 Amendments
Amendment by
Amendment by
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1970 Amendment
Amendment by
[§§4294, 4295. Repealed. Pub. L. 94–455, title XIX, §1904(a)(10), (11), Oct. 4, 1976, 90 Stat. 1812 ]
Section 4294, added
Section 4295, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1904(d) of
CHAPTER 34 —TAXES ON CERTAIN INSURANCE POLICIES
Editorial Notes
Prior Provisions
The provisions of a prior
Subchapter A, Issuance of capital stock and certificates of indebtedness by a corporation, comprising sections 4301 to 4305 and 4311 to 4316.
Subchapter B, Sale or transfers of capital stock and certificates of indebtedness of a corporation, comprising sections 4321 to 4324, 4331 to 4333, 4341 to 4345, and 4351 to 4354.
Subchapter C, Conveyances, comprising sections 4361 to 4363.
Subchapter D, Policies issued by foreign insurers, comprising sections 4371 to 4375.
Subchapter E, Miscellaneous provisions applicable to documentary stamp taxes, comprising sections 4381 to 4384.
Subchapters A and B were repealed by
Subchapter C was struck out by
Subchapter D heading was struck out, sections 4371 to 4373 were reenacted without change, section 4374, "liability for tax", was substituted for section 4374, "payment of tax", and section 4375 was struck out by
Subchapter E, section 4381 was repealed by
The subject matter of the prior sections was as follows:
A prior section 4301, acts Aug. 16, 1954, ch. 736,
A prior section 4302, acts Aug. 16, 1954, ch. 736,
A prior section 4303, acts Aug. 16, 1954, ch. 736,
A prior section 4304, acts Aug. 16, 1954, ch. 736,
A prior section 4305, acts Aug. 16, 1954, ch. 736,
A prior section 4311, acts Aug. 16, 1954, ch. 736,
A prior section 4312, acts Aug. 16, 1954, ch. 736,
A prior section 4313, acts Aug. 16, 1954, ch. 736,
A prior section 4314, acts Aug. 16, 1954, ch. 736,
A prior section 4315, acts Aug. 16, 1954, ch. 736,
A prior section 4321, acts Aug. 16, 1954, ch. 736,
A prior section 4322, acts Aug. 16, 1954, ch. 736,
A prior section 4323, acts Aug. 16, 1954, ch. 736,
A prior section 4324, acts Aug. 16, 1954, ch. 736,
A prior section 4331, acts Aug. 16, 1954, ch. 736,
A prior section 4332, acts Aug. 16, 1954, ch. 736,
A prior section 4333, acts Aug. 16, 1954, ch. 736,
A prior section 4341, acts Aug. 16, 1954, ch. 736,
A prior section 4342, acts Aug. 16, 1954, ch. 736,
A prior section 4343, acts Aug. 16, 1954, ch. 736,
A prior section 4344,
A prior section 4345, acts Aug. 16, 1954, ch. 736,
A prior section 4346, acts Aug. 16, 1954, ch. 736,
A prior section 4351, acts Aug. 16, 1954, ch. 736,
A prior section 4352, acts Aug. 16, 1954, ch. 736,
A prior section 4353,
A prior section 4354, acts Aug. 16, 1954, ch. 736,
A prior section 4361, acts Aug. 16, 1954, ch. 736,
A prior section 4362, acts Aug. 16, 1954, ch. 736,
A prior section 4363, acts Aug. 16, 1954, ch. 736,
A prior section 4375, acts Aug. 16, 1954, ch. 736,
A prior section 4381, acts Aug. 16, 1954, ch. 736,
A prior section 4382, acts Aug. 16, 1954, ch. 736,
A prior section 4383,
A prior section 4384, acts Aug. 16, 1954, ch. 736,
Amendments
2010—
1976—
1965—
Statutory Notes and Related Subsidiaries
Effective Dates of Repeal
Repeal of sections 4361 to 4363, 4375, 4382 to 4384 by section 1904(a)(12) of
1 Section numbers editorially supplied.
Subchapter A—Policies Issued By Foreign Insurers
Editorial Notes
Amendments
2010—
§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; 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).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1989—Par. (2).
1987—Par. (2).
1984—Par. (2).
1976—
1965—
1959—Par. (2).
1958—
1956—Par. (2). Act Mar. 13, 1956, substituted "section 816" for "section 807".
Statutory Notes and Related Subsidiaries
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Effective Date of 1959 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by
Effective Date of 1956 Amendment
Amendment by act Mar. 13, 1956, applicable only to taxable years beginning after Dec. 31, 1954, see section 6 of act Mar. 13, 1956, set out as a note under
§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 (other than life) 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 the purpose 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 the purpose of section 4371(3), the term "policy of reinsurance" means any policy or other instrument by whatever name called whereby a contract of 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.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1976—Subsec. (a).
Subsec. (c).
1958—Subsec. (d)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by
§4373. Exemptions
The tax imposed by section 4371 shall not apply to—
(1) Effectively connected items
Any amount which is effectively connected with the conduct of a trade or business within the United States unless such amount is exempt from the application of section 882(a) pursuant to a treaty obligation of the United States.
(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.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1988—Par. (1).
1976—Par. (1).
1958—
Statutory Notes and Related Subsidiaries
Effective Date of 1988 Amendment
Effective Date of 1976 Amendment
Amendment by
§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.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Prior Provisions
For provisions of prior sections 4375, 4381 to 4384, see Prior Provisions note preceding
Amendments
1976—
1965—
1958—
Statutory Notes and Related Subsidiaries
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1965 Amendment
Determination of Partnership as Continuing or Terminated Partnership
Subchapter B—Insured and Self-Insured Health Plans
§4375. Health insurance
(a) Imposition of fee
There is hereby imposed on each specified health insurance policy for each policy year ending after September 30, 2012, a fee equal to the product of $2 ($1 in the case of policy years ending during fiscal year 2013) multiplied by the average number of lives covered under the policy.
(b) Liability for fee
The fee imposed by subsection (a) shall be paid by the issuer of the policy.
(c) Specified health insurance policy
For purposes of this section:
(1) In general
Except as otherwise provided in this section, the term "specified health insurance policy" means any accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States.
(2) Exemption for certain policies
The term "specified health insurance policy" does not include any insurance if substantially all of its coverage is of excepted benefits described in section 9832(c).
(3) Treatment of prepaid health coverage arrangements
(A) In general
In the case of any arrangement described in subparagraph (B), such arrangement shall be treated as a specified health insurance policy, and the person referred to in such subparagraph shall be treated as the issuer.
(B) Description of arrangements
An arrangement is described in this subparagraph if under such arrangement fixed payments or premiums are received as consideration for any person's agreement to provide or arrange for the provision of accident or health coverage to residents of the United States, regardless of how such coverage is provided or arranged to be provided.
(d) Adjustments for increases in health care spending
In the case of any policy year ending in any fiscal year beginning after September 30, 2014, the dollar amount in effect under subsection (a) for such policy year shall be equal to the sum of such dollar amount for policy years ending in the previous fiscal year (determined after the application of this subsection), plus an amount equal to the product of—
(1) such dollar amount for policy years ending in the previous fiscal year, multiplied by
(2) the percentage increase in the projected per capita amount of National Health Expenditures, as most recently published by the Secretary before the beginning of the fiscal year.
(e) Termination
This section shall not apply to policy years ending after September 30, 2029.
(Added
Editorial Notes
Amendments
2019—Subsec. (e).
§4376. Self-insured health plans
(a) Imposition of fee
In the case of any applicable self-insured health plan for each plan year ending after September 30, 2012, there is hereby imposed a fee equal to $2 ($1 in the case of plan years ending during fiscal year 2013) multiplied by the average number of lives covered under the plan.
(b) Liability for fee
(1) In general
The fee imposed by subsection (a) shall be paid by the plan sponsor.
(2) Plan sponsor
For purposes of paragraph (1) the term "plan sponsor" means—
(A) the employer in the case of a plan established or maintained by a single employer,
(B) the employee organization in the case of a plan established or maintained by an employee organization,
(C) in the case of—
(i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations,
(ii) a multiple employer welfare arrangement, or
(iii) a voluntary employees' beneficiary association described in section 501(c)(9), the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan, or
(D) the cooperative or association described in subsection (c)(2)(F) in the case of a plan established or maintained by such a cooperative or association.
(c) Applicable self-insured health plan
For purposes of this section, the term "applicable self-insured health plan" means any plan for providing accident or health coverage if—
(1) any portion of such coverage is provided other than through an insurance policy, and
(2) such plan is established or maintained—
(A) by 1 or more employers for the benefit of their employees or former employees,
(B) by 1 or more employee organizations for the benefit of their members or former members,
(C) jointly by 1 or more employers and 1 or more employee organizations for the benefit of employees or former employees,
(D) by a voluntary employees' beneficiary association described in section 501(c)(9),
(E) by any organization described in section 501(c)(6), or
(F) in the case of a plan not described in the preceding subparagraphs, by a multiple employer welfare arrangement (as defined in section 3(40) of Employee Retirement Income Security Act of 1974), a rural electric cooperative (as defined in section 3(40)(B)(iv) of such Act), or a rural telephone cooperative association (as defined in section 3(40)(B)(v) of such Act).
(d) Adjustments for increases in health care spending
In the case of any plan year ending in any fiscal year beginning after September 30, 2014, the dollar amount in effect under subsection (a) for such plan year shall be equal to the sum of such dollar amount for plan years ending in the previous fiscal year (determined after the application of this subsection), plus an amount equal to the product of—
(1) such dollar amount for plan years ending in the previous fiscal year, multiplied by
(2) the percentage increase in the projected per capita amount of National Health Expenditures, as most recently published by the Secretary before the beginning of the fiscal year.
(e) Termination
This section shall not apply to plan years ending after September 30, 2029.
(Added
Editorial Notes
References in Text
Section 3(40) of Employee Retirement Income Security Act of 1974, referred to in subsec. (c)(2)(F), is classified to
Amendments
2019—Subsec. (e).
§4377. Definitions and special rules
(a) Definitions
For purposes of this subchapter—
(1) Accident and health coverage
The term "accident and health coverage" means any coverage which, if provided by an insurance policy, would cause such policy to be a specified health insurance policy (as defined in section 4375(c)).
(2) Insurance policy
The term "insurance policy" means any policy or other instrument whereby a contract of insurance is issued, renewed, or extended.
(3) United States
The term "United States" includes any possession of the United States.
(b) Treatment of governmental entities
(1) In general
For purposes of this subchapter—
(A) the term "person" includes any governmental entity, and
(B) notwithstanding any other law or rule of law, governmental entities shall not be exempt from the fees imposed by this subchapter except as provided in paragraph (2).
(2) Treatment of exempt governmental programs
In the case of an exempt governmental program, no fee shall be imposed under section 4375 or section 4376 on any covered life under such program.
(3) Exempt governmental program defined
For purposes of this subchapter, the term "exempt governmental program" means—
(A) any insurance program established under title XVIII of the Social Security Act,
(B) the medical assistance program established by title XIX or XXI of the Social Security Act,
(C) any program established by Federal law for providing medical care (other than through insurance policies) to individuals (or the spouses and dependents thereof) by reason of such individuals being members of the Armed Forces of the United States or veterans, and
(D) any program established by Federal law for providing medical care (other than through insurance policies) to members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act).
(c) Treatment as tax
For purposes of subtitle F, the fees imposed by this subchapter shall be treated as if they were taxes.
(d) No cover over to possessions
Notwithstanding any other provision of law, no amount collected under this subchapter shall be covered over to any possession of the United States.
(Added
Editorial Notes
References in Text
The Social Security Act, referred to in subsec. (b)(3)(A), (B), is act Aug. 14, 1935, ch. 531,
Section 4(d) of the Indian Health Care Improvement Act, referred to in subsec. (b)(3)(D), is classified to
CHAPTER 35 —TAXES ON WAGERING
1 Section numbers editorially supplied.
Subchapter A—Tax on Wagers
§4401. Imposition of tax
(a) Wagers
(1) State authorized wagers
There shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager.
(2) Unauthorized wagers
There shall be imposed on any wager not described in paragraph (1) an excise tax equal to 2 percent of the amount of such wager.
(b) Amount of wager
In determining the amount of any wager for the purposes of this subchapter, all charges incident to the placing of such wager shall be included; except that if the taxpayer establishes, in accordance with regulations prescribed by the Secretary, that an amount equal to the tax imposed by this subchapter has been collected as a separate charge from the person placing such wager, the amount so collected shall be excluded.
(c) Persons liable for tax
Each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax under this subchapter on all wagers placed with him. Each person who conducts any wagering pool or lottery shall be liable for and shall pay the tax under this subchapter on all wagers placed in such pool or lottery. Any person required to register under section 4412 who receives wagers for or on behalf of another person without having registered under section 4412 the name and place of residence of such other person shall be liable for and shall pay the tax under this subchapter on all such wagers received by him.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1982—Subsec. (a).
1976—Subsec. (b).
1974—Subsec. (a).
1958—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1982 Amendment
Effective Date of 1974 Amendment
Effective Date of 1958 Amendment
§4402. Exemptions
No tax shall be imposed by this subchapter—
(1) Parimutuels
On any wager placed with, or on any wager placed in a wagering pool conducted by, a parimutuel wagering enterprise licensed under State law,
(2) Coin-operated devices
On any wager placed in a coin-operated device (as defined in section 4462 as in effect for years beginning before July 1, 1980), or on any amount paid, in lieu of inserting a coin, token, or similar object, to operate a device described in section 4462(a)(2) (as so in effect), or
(3) State-conducted lotteries, etc.
On any wager placed in a sweepstakes, wagering pool, or lottery which is conducted by an agency of a State acting under authority of State law, but only if such wager is placed with the State agency conducting such sweepstakes, wagering pool, or lottery, or with its authorized employees or agents.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
Section 4462, referred to in par. (2), was repealed by
Amendments
1978—Par. (2).
1976—Par. (3).
1965—Par. (2).
Par. (3).
1958—Par. (2).
Statutory Notes and Related Subsidiaries
Effective Date of 1978 Amendment
Effective Date of 1976 Amendment
Effective Date of 1965 Amendment
Effective Date of 1958 Amendment
"(1) shall be the amount reckoned proportionately from such effective date through June 30, 1959, and
"(2) shall be due on, and payable on or before, the last day of the month the first day of which is such effective date."
§4403. Record requirements
Each person liable for tax under this subchapter shall keep a daily record showing the gross amount of all wagers on which he is so liable, in addition to all other records required pursuant to section 6001(a).
(Aug. 16, 1954, ch. 736,
§4404. Territorial extent
The tax imposed by this subchapter shall apply only to wagers
(1) accepted in the United States, or
(2) placed by a person who is in the United States
(A) with a person who is a citizen or resident of the United States, or
(B) in a wagering pool or lottery conducted by a person who is a citizen or resident of the United States.
(Aug. 16, 1954, ch. 736,
§4405. Cross references
For penalties and other administrative provisions applicable to this subchapter, see sections 4421 to 4423, inclusive; and subtitle F.
(Aug. 16, 1954, ch. 736,
Subchapter B—Occupational Tax
§4411. Imposition of tax
(a) In general
There shall be imposed a special tax of $500 per year to be paid by each person who is liable for the tax imposed under section 4401 or who is engaged in receiving wagers for or on behalf of any person so liable.
(b) Authorized persons
Subsection (a) shall be applied by substituting "$50" for "$500" in the case of—
(1) any person whose liability for tax under section 4401 is determined only under paragraph (1) of section 4401(a), and
(2) any person who is engaged in receiving wagers only for or on behalf of persons described in paragraph (1).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1982—
1974—
Statutory Notes and Related Subsidiaries
Effective Date of 1982 Amendment
Effective Date of 1974 Amendment
Amendment by
Persons Engaged in Activities on December 1, 1974, Requiring Payment of Tax; Persons Paying Tax and Registering Before December 1, 1974
"(A) Any person who, on December 1, 1974, is engaged in an activity which makes him liable for payment of the tax imposed by section 4411 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect on such date) shall be treated as commencing such activity on such date for purposes of such section and section 4901 of such Code.
"(B) Any person who, before December 1, 1974.—
"(i) became liable for and paid the tax imposed by section 4411 of the Internal Revenue Code of 1986 (as in effect on July 1, 1974) for the year ending June 30, 1975, shall not be liable for any additional tax under such section for such year, and
"(ii) registered under section 4412 of such Code (as in effect on July 1, 1974) for the year ending June 30, 1975, shall not be required to reregister under such section for such year."
§4412. Registration
(a) Requirement
Each person required to pay a special tax under this subchapter shall register with the official in charge of the internal revenue district—
(1) his name and place of residence;
(2) if he is liable for tax under subchapter A, each place of business where the activity which makes him so liable is carried on, and the name and place of residence of each person who is engaged in receiving wagers for him or on his behalf; and
(3) if he is engaged in receiving wagers for or on behalf of any person liable for tax under subchapter A, the name and place of residence of each such person.
(b) Firm or company
Where subsection (a) requires the name and place of residence of a firm or company to be registered, the names and places of residence of the several persons constituting the firm or company shall be registered.
(c) Supplemental information
In accordance with regulations prescribed by the Secretary, the Secretary may require from time to time such supplemental information from any person required to register under this section as may be needful to the enforcement of this chapter.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1976—Subsec. (c).
Statutory Notes and Related Subsidiaries
Persons Paying Tax and Registering Before December 1, 1974
Persons registered before Dec. 1, 1974 under this section (as in effect on July 1, 1974) for the year ending June 30, 1975, not required to reregister under this section for such year, see section 3(d)(2) of
§4413. Certain provisions made applicable
Sections 4901, 4902, 4904, 4905, and 4906 shall extend to and apply to the special tax imposed by this subchapter and to the persons upon whom it is imposed, and for that purpose any activity which makes a person liable for special tax under this subchapter shall be considered to be a business or occupation referred to in such sections. No other provision of sections 4901 to 4907, inclusive, shall so extend or apply.
(Aug. 16, 1954, ch. 736,
§4414. Cross references
For penalties and other general and administrative provisions applicable to this subchapter, see sections 4421 to 4423, inclusive; and subtitle F.
(Aug. 16, 1954, ch. 736,
Subchapter C—Miscellaneous Provisions
Editorial Notes
Amendments
1974—
§4421. Definitions
For purposes of this chapter—
(1) Wager
The term "wager" means—
(A) any wager with respect to a sports event or a contest placed with a person engaged in the business of accepting such wagers,
(B) any wager placed in a wagering pool with respect to a sports event or a contest, if such pool is conducted for profit, and
(C) any wager placed in a lottery conducted for profit.
(2) Lottery
The term "lottery" includes the numbers game, policy, and similar types of wagering. The term does not include—
(A) any game of a type in which usually
(i) the wagers are placed,
(ii) the winners are determined, and
(iii) the distribution of prizes or other property is made, in the presence of all persons placing wagers in such game, and
(B) any drawing conducted by an organization exempt from tax under sections 501 and 521, if no part of the net proceeds derived from such drawing inures to the benefit of any private shareholder or individual.
(Aug. 16, 1954, ch. 736,
§4422. Applicability of Federal and State laws
The payment of any tax imposed by this chapter with respect to any activity shall not exempt any person from any penalty provided by a law of the United States or of any State for engaging in the same activity, nor shall the payment of any such tax prohibit any State from placing a tax on the same activity for State or other purposes.
(Aug. 16, 1954, ch. 736,
§4423. Inspection of books
Notwithstanding section 7605(b), the books of account of any person liable for tax under this chapter may be examined and inspected as frequently as may be needful to the enforcement of this chapter.
(Aug. 16, 1954, ch. 736,
§4424. Disclosure of wagering tax information
(a) General rule
Except as otherwise provided in this section, neither the Secretary nor any other officer or employee of the Treasury Department may divulge or make known in any manner whatever to any person—
(1) any original, copy, or abstract of any return, payment, or registration made pursuant to this chapter,
(2) any record required for making any such return, payment, or registration, which the Secretary is permitted by the taxpayer to examine or which is produced pursuant to section 7602, or
(3) any information come at by the exploitation of any such return, payment, registration, or record.
(b) Permissible disclosure
A disclosure otherwise prohibited by subsection (a) may be made in connection with the administration or civil or criminal enforcement of any tax imposed by this title. However, any document or information so disclosed may not be—
(1) divulged or made known in any manner whatever by any officer or employee of the United States to any person except in connection with the administration or civil or criminal enforcement of this title, nor
(2) used, directly or indirectly, in any criminal prosecution for any offense occurring before the date of enactment of this section.
(c) Use of documents possessed by taxpayer
Except in connection with the administration or civil or criminal enforcement of any tax imposed by this title—
(1) any stamp denoting payment of the special tax under this chapter,
(2) any original, copy, or abstract possessed by a taxpayer of any return, payment, or registration made by such taxpayer pursuant to this chapter, and
(3) any information come at by the exploitation of any such document,
shall not be used against such taxpayer in any criminal proceeding.
(d) Inspection by committees of Congress
Section 6103(f) shall apply with respect to any return, payment, or registration made pursuant to this chapter.
(Added
Editorial Notes
Amendments
1976—Subsec. (a).
Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1976 Amendment
Amendment by section 1202(h)(6) of
Effective Date
Section effective Dec. 1, 1974, and applicable only with respect to wagers placed on or after such date, see section 3(d)(1) of
CHAPTER 36 —CERTAIN OTHER EXCISE TAXES
Editorial Notes
Amendments
1997—
1989—
1986—
1982—
1980—
1970—
1965—
1956—Act June 29, 1956, ch. 462, title II, §206(c),
1 Section numbers editorially supplied.
2 Subchapter repealed by
Subchapter A—Harbor Maintenance Tax
Editorial Notes
Prior Provisions
A prior subchapter A (§§4451 to 4457), act Aug. 16, 1954, ch. 736,
§4461. Imposition of tax
(a) General rule
There is hereby imposed a tax on any port use.
(b) Amount of tax
The amount of the tax imposed by subsection (a) on any port use shall be an amount equal to 0.125 percent of the value of the commercial cargo involved.
(c) Liability and time of imposition of tax
(1) Liability
The tax imposed by subsection (a) shall be paid by—
(A) in the case of cargo entering the United States, the importer, or
(B) in any other case, the shipper.
(2) Time of imposition
Except as provided by regulations, the tax imposed by subsection (a) shall be imposed at the time of unloading.
(Added
Editorial Notes
Prior Provisions
For prior section 4461, see Prior Provisions note set out preceding
Amendments
2005—Subsec. (c)(1).
Subsec. (c)(2).
"(A) in the case of cargo to be exported from the United States, at the time of loading, and
"(B) in any other case,".
1990—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Effective Date of 1990 Amendment
Effective Date
Authorization of Appropriations
Study of Cargo Diversion
§4462. Definitions and special rules
(a) Definitions
For purposes of this subchapter—
(1) Port use
The term "port use" means—
(A) the loading of commercial cargo on, or
(B) the unloading of commercial cargo from,
a commercial vessel at a port.
(2) Port
(A) In general
The term "port" means any channel or harbor (or component thereof) in the United States, which—
(i) is not an inland waterway, and
(ii) is open to public navigation.
(B) Exception for certain facilities
The term "port" does not include any channel or harbor with respect to which no Federal funds have been used since 1977 for construction, maintenance, or operation, or which was deauthorized by Federal law before 1985.
(C) Special rule for Columbia River
The term "port" shall include the channels of the Columbia River in the States of Oregon and Washington only up to the downstream side of Bonneville lock and dam.
(3) Commercial cargo
(A) In general
The term "commercial cargo" means any cargo transported on a commercial vessel, including passengers transported for compensation or hire.
(B) Certain items not included
The term "commercial cargo" does not include—
(i) bunker fuel, ship's stores, sea stores, or the legitimate equipment necessary to the operation of a vessel, or
(ii) fish or other aquatic animal life caught and not previously landed on shore.
(4) Commercial vessel
(A) In general
The term "commercial vessel" means any vessel used—
(i) in transporting cargo by water for compensation or hire, or
(ii) in transporting cargo by water in the business of the owner, lessee, or operator of the vessel.
(B) Exclusion of ferries
(i) In general
The term "commercial vessel" does not include any ferry engaged primarily in the ferrying of passengers (including their vehicles) between points within the United States, or between the United States and contiguous countries.
(ii) Ferry
The term "ferry" means any vessel which arrives in the United States on a regular schedule during its operating season at intervals of at least once each business day.
(5) Value
(A) In general
The term "value" means, except as provided in regulations, the value of any commercial cargo as determined by standard commercial documentation.
(B) Transportation of passengers
In the case of the transportation of passengers for hire, the term "value" means the actual charge paid for such service or the prevailing charge for comparable service if no actual charge is paid.
(b) Special rule for Alaska, Hawaii, and possessions
(1) In general
No tax shall be imposed under section 4461(a) with respect to—
(A) cargo loaded on a vessel in a port in the United States mainland for transportation to Alaska, Hawaii, or any possession of the United States for ultimate use or consumption in Alaska, Hawaii, or any possession of the United States,
(B) cargo loaded on a vessel in Alaska, Hawaii, or any possession of the United States for transportation to the United States mainland, Alaska, Hawaii, or such a possession for ultimate use or consumption in the United States mainland, Alaska, Hawaii, or such a possession,
(C) the unloading of cargo described in subparagraph (A) or (B) in Alaska, Hawaii, or any possession of the United States, or in the United States mainland, respectively, or
(D) cargo loaded on a vessel in Alaska, Hawaii, or a possession of the United States and unloaded in the State or possession in which loaded, or passengers transported on United States flag vessels operating solely within the State waters of Alaska or Hawaii and adjacent international waters.
(2) Cargo does not include crude oil with respect to Alaska
For purposes of this subsection, the term "cargo" does not include crude oil with respect to Alaska.
(3) United States mainland
For purposes of this subsection, the term "United States mainland" means the continental United States (not including Alaska).
(c) Coordination of tax where transportation subject to tax imposed by section 4042
No tax shall be imposed under this subchapter with respect to the loading or unloading of any cargo on or from a vessel if any fuel of such vessel has been (or will be) subject to the tax imposed by section 4042 (relating to tax on fuel used in commercial transportation on inland waterways).
(d) Nonapplicability of tax to exports
The tax imposed by section 4461(a) shall not apply to any port use with respect to any commercial cargo to be exported from the United States.
(e) Exemption for United States
No tax shall be imposed under this subchapter on the United States or any agency or instrumentality thereof.
(f) Extension of provisions of law applicable to customs duty
(1) In general
Except to the extent otherwise provided in regulations, all administrative and enforcement provisions of customs laws and regulations shall apply in respect of the tax imposed by this subchapter (and in respect of persons liable therefor) as if such tax were a customs duty. For purposes of the preceding sentence, any penalty expressed in terms of a relationship to the amount of the duty shall be treated as not less than the amount which bears a similar relationship to the value of the cargo.
(2) Jurisdiction of courts and agencies
For purposes of determining the jurisdiction of any court of the United States or any agency of the United States, the tax imposed by this subchapter shall be treated as if such tax were a customs duty.
(3) Administrative provisions applicable to tax law not to apply
The tax imposed by this subchapter shall not be treated as a tax for purposes of subtitle F or any other provision of law relating to the administration and enforcement of internal revenue taxes.
(g) Special rules
Except as provided by regulations—
(1) Tax imposed only once
Only 1 tax shall be imposed under section 4461(a) with respect to the loading on and unloading from, or the unloading from and the loading on, the same vessel of the same cargo.
(2) Exception for intraport movements
Under regulations, no tax shall be imposed under section 4461(a) on the mere movement of cargo within a port.
(3) Relay cargo
Only 1 tax shall be imposed under section 4461(a) on cargo (moving under a single bill of lading) which is unloaded from one vessel and loaded onto another vessel at any port in the United States for relay to or from any port in Alaska, Hawaii, or any possession of the United States. For purposes of this paragraph, the term "cargo" does not include any item not treated as cargo under subsection (b)(2).
(h) Exemption for humanitarian and development assistance cargos
No tax shall be imposed under this subchapter on any nonprofit organization or cooperative for cargo which is owned or financed by such nonprofit organization or cooperative and which is certified by the United States Customs Service as intended for use in humanitarian or development assistance overseas.
(i) Regulations
The Secretary may prescribe such additional regulations as may be necessary to carry out the purposes of this subchapter including, but not limited to, regulations—
(1) providing for the manner and method of payment and collection of the tax imposed by this subchapter,
(2) providing for the posting of bonds to secure payment of such tax,
(3) exempting any transaction or class of transactions from such tax where the collection of such tax is not administratively practical, and
(4) providing for the remittance or mitigation of penalties and the settlement or compromise of claims.
(Added
Editorial Notes
Prior Provisions
For prior section 4462, see Prior Provisions note set out preceding
Amendments
2005—Subsec. (d).
1996—Subsec. (b)(1)(D).
1988—Subsec. (b)(1)(B).
Subsec. (g)(3).
Subsecs. (h), (i).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by
Effective Date of 1996 Amendment
Effective Date of 1988 Amendment
Amendment by section 2002(b) of
Effective Date
Section effective Apr. 1, 1987, see section 1402(c) of
Transfer of Functions
For transfer of functions, personnel, assets, and liabilities of the United States Customs Service of the Department of the Treasury, including functions of the Secretary of the Treasury relating thereto, to the Secretary of Homeland Security, and for treatment of related references, see
Subchapter B—Transportation by Water
Editorial Notes
Prior Provisions
A prior subchapter B, consisted of
Section 4461, acts Aug. 16, 1954, ch. 736,
Section 4462, acts Aug. 16, 1954, ch. 736,
Section 4463, act Aug. 16, 1954, ch. 736,
Section 4464, added
Amendments
1996—
§4471. Imposition of tax
(a) In general
There is hereby imposed a tax of $3 per passenger on a covered voyage.
(b) By whom paid
The tax imposed by this section shall be paid by the person providing the covered voyage.
(c) Time of imposition
The tax imposed by this section shall be imposed only once for each passenger on a covered voyage, either at the time of first embarkation or disembarkation in the United States.
(Added
Editorial Notes
Prior Provisions
A prior section 4471 was contained in subchapter C of this chapter prior to repeal by
Statutory Notes and Related Subsidiaries
Effective Date
"(1)
"(2)
§4472. Definitions
For purposes of this subchapter—
(1) Covered voyage
(A) In general
The term "covered voyage" means a voyage of—
(i) a commercial passenger vessel which extends over 1 or more nights, or
(ii) a commercial vessel transporting passengers engaged in gambling aboard the vessel beyond the territorial waters of the United States,
during which passengers embark or disembark the vessel in the United States. Such term shall not include any voyage on any vessel owned or operated by the United States, a State, or any agency or subdivision thereof.
(B) Exception for certain voyages on passenger vessels
The term "covered voyage" shall not include a voyage of a passenger vessel of less than 12 hours between 2 ports in the United States.
(2) Passenger vessel
The term "passenger vessel" means any vessel having berth or stateroom accommodations for more than 16 passengers.
(Added
Editorial Notes
Prior Provisions
A prior section 4472 was contained in subchapter C of this chapter prior to repeal by
[Subchapter C—Repealed]
[§§4471 to 4474. Repealed. Pub. L. 89–44, title IV, §404, June 21, 1965, 79 Stat. 149 ]
Section 4471, act Aug. 16, 1954, ch. 736,
Section 4472, act Aug. 16, 1954, ch. 736,
Section 4473, acts Aug. 16, 1954, ch. 736,
Section 4474, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable on and after July 1, 1965, see section 701(c)(2) of
Subchapter D—Tax on Use of Certain Vehicles
Editorial Notes
Amendments
1983—
1956—Act June 29, 1956, ch. 462, title II, §206(a),
§4481. Imposition of tax
(a) Imposition of tax
A tax is hereby imposed on the use of any highway motor vehicle which (together with the semitrailers and trailers customarily used in connection with highway motor vehicles of the same type as such highway motor vehicle) has a taxable gross weight of at least 55,000 pounds at the rate specified in the following table:
| Taxable gross weight: | Rate of tax: |
|---|---|
| At least 55,000 pounds, but not over 75,000 pounds | $100 per year plus $22 for each 1,000 pounds (or fraction thereof) in excess of 55,000 pounds. |
| Over 75,000 pounds | $550. |
(b) By whom paid
The tax imposed by this section shall be paid by the person in whose name the highway motor vehicle is, or is required to be, registered under the law of the State or contiguous foreign country in which such vehicle is, or is required to be, registered, or, in case the highway motor vehicle is owned by the United States, by the agency or instrumentality of the United States operating such vehicle.
(c) Proration of tax
(1) Where first use occurs after first month
If in any taxable period the first use of the highway motor vehicle is after the first month in such period, the tax shall be reckoned proportionately from the first day of the month in which such use occurs to and including the last day in such taxable period.
(2) Where vehicle sold, destroyed, or stolen
(A) In general
If in any taxable period a highway motor vehicle is sold, destroyed, or stolen before the first day of the last month in such period and not subsequently used during such taxable period, the tax shall be reckoned proportionately from the first day of the month in such period in which the first use of such highway motor vehicle occurs to and including the last day of the month in which such highway motor vehicle was sold, destroyed, or stolen.
(B) Destroyed
For purposes of subparagraph (A), a highway motor vehicle is destroyed if such vehicle is damaged by reason of an accident or other casualty to such an extent that it is not economic to rebuild.
(d) One tax liability per period
To the extent that the tax imposed by this section is paid with respect to any highway motor vehicle for any taxable period, no further tax shall be imposed by this section for such taxable period with respect to such vehicle.
(e) Electronic filing
Any taxpayer who files a return under this section with respect to 25 or more vehicles for any taxable period shall file such return electronically.
(f) Period tax in effect
The tax imposed by this section shall apply only to use before October 1, 2029.
(Added June 29, 1956, ch. 462, title II, §206(a),
Editorial Notes
Amendments
2021—Subsec. (f).
2018—Subsec. (d).
"(1)
"(2)
2015—Subsec. (f).
2012—Subsec. (f).
2011—Subsec. (f).
2005—Subsec. (f).
2004—Subsec. (c)(2).
Subsec. (c)(2)(A).
Subsecs. (e), (f).
1998—Subsec. (e).
1996—Subsec. (e).
1991—Subsec. (e).
1990—Subsec. (e).
1987—Subsec. (b).
Subsec. (e).
1984—Subsec. (a).
| Taxable gross weight | Rate of tax | |
|---|---|---|
| At least | But less than | |
| 33,000 pounds | 55,000 | $50 a year, plus $25 for each 1,000 pounds or fraction thereof in excess of 33,000 pounds. |
| 55,000 pounds | 80,000 | $600 a year, plus the applicable rate for each 1,000 pounds or fraction thereof in excess of 55,000 pounds |
| 80,000 pounds or more | The maximum tax a year. | |
and struck out par. (2) which provided applicable rates and maximum taxes for taxable periods beginning July 1, 1984 through 1988 or thereafter.
1983—Subsec. (a).
Subsec. (c).
Subsec. (e).
1978—Subsec. (a).
Subsec. (e).
1976—Subsec. (a).
Subsec. (e).
1970—Subsec. (a).
Subsec. (e).
1961—Subsec. (a).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective Date of 2012 Amendment
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Effective Date of 1987 Amendment
Effective Date of 1984 Amendment
Amendment by section 734(f) of
Effective Date of 1983 Amendment
"(1)
"(2)
"[No subpar. (C) has been enacted.]
"(i) any trade or business (whether or not incorporated) which is under common control with the taxpayer (within the meaning of section 52(b)), or
"(ii) any member of any controlled groups of corporations of which the taxpayer is a member, for any taxable period shall be treated as being owned by the taxpayer during such period. The Secretary shall prescribe regulations which provide attribution rules that take into account, in addition to the persons and entities described in the preceding sentence, taxpayers who own highway motor vehicles through partnerships, joint ventures, and corporations.
"(i) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in section 1563(a)(1), and
"(ii) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
Effective Date of 1961 Amendment
Amendment by
Effective Date
Section effective June 29, 1956, see section 211 of act June 29, 1956, set out as an Effective Date of 1956 Amendment note under
Regulations
Savings Provision
For provisions that nothing in amendment by
Special Rules in the Case of Certain Owner-Operators
"(1)
"(A) $3 for each 1,000 pounds of taxable gross weight (or fraction thereof), or
"(B) the amount of the tax which would be imposed under such section 4481(a) without regard to this paragraph.
"(2)
"(3)
"(4)
Studies Relating to Heavy Vehicle Use Tax
Study of Alternatives to Tax on Use of Heavy Trucks
§4482. Definitions
(a) Highway motor vehicle
For purposes of this subchapter, the term "highway motor vehicle" means any motor vehicle which is a highway vehicle.
(b) Taxable gross weight
For purposes of this subchapter, the term "taxable gross weight", when used with respect to any highway motor vehicle, means the sum of—
(1) the actual unloaded weight of—
(A) such highway motor vehicle fully equipped for service, and
(B) the semitrailers and trailers (fully equipped for service) customarily used in connection with highway motor vehicles of the same type as such highway motor vehicle, and
(2) the weight of the maximum load customarily carried on highway motor vehicles of the same type as such highway motor vehicle and on the semitrailers and trailers referred to in paragraph (1)(B).
Taxable gross weight shall be determined under regulations prescribed by the Secretary (which regulations may include formulas or other methods for determining the taxable gross weight of vehicles by classes, specifications, or otherwise).
(c) Other definitions and special rule
For purposes of this subchapter—
(1) State
The term "State" means a State and the District of Columbia.
(2) Year
The term "year" means the one-year period beginning on July 1.
(3) Use
The term "use" means use in the United States on the public highways.
(4) Taxable period
The term "taxable period" means any year beginning before July 1, 2029, and the period which begins on July 1, 2029, and ends at the close of September 30, 2029.
(5) Customary use
A semitrailer or trailer shall be treated as customarily used in connection with a highway motor vehicle if such vehicle is equipped to tow such semitrailer or trailer.
(d) Special rule for taxable period in which termination date occurs
In the case of the taxable period which ends on September 30, 2029, the amount of the tax imposed by section 4481 with respect to any highway motor vehicle shall be determined by reducing each dollar amount in the table contained in section 4481(a) by 75 percent.
(Added June 29, 1956, ch. 462, title II, §206(a),
Editorial Notes
Amendments
2021—Subsecs. (c)(4), (d).
2015—Subsecs. (c)(4), (d).
2012—Subsec. (c)(4).
Subsec. (d).
2011—Subsecs. (c)(4), (d).
2005—Subsecs. (c)(4), (d).
1998—Subsecs. (c)(4), (d).
1991—Subsecs. (c)(4), (d).
1990—Subsecs. (c)(4), (d).
1987—Subsecs. (c)(4), (d).
1983—Subsec. (c).
Subsec. (c)(4).
Subsec. (c)(5).
Subsec. (d).
1978—Subsec. (c)(4).
1976—Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(4).
1970—Subsec. (c)(4).
1961—Subsec. (c)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by section 40102(b)(1)(B) of
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by section 513(c), (e) of
Effective Date of 1976 Amendment
Amendment by section 1904(c) of
Effective Date of 1961 Amendment
Amendment by
Special Rules in the Case of Small Owner-Operators
Amendment by section 513(c) of
§4483. Exemptions
(a) State and local governmental exemption
Under regulations prescribed by the Secretary, no tax shall be imposed by section 4481 on the use of any highway motor vehicle by any State or any political subdivision of a State.
(b) Exemption for United States
The Secretary of the Treasury may authorize exemption from the tax imposed by section 4481 as to the use by the United States of any particular highway motor vehicle, or class of highway motor vehicles, if he determines that the imposition of such tax with respect to such use will cause substantial burden or expense which can be avoided by granting tax exemption and that full benefit of such exemption, if granted, will accrue to the United States.
(c) Certain transit-type buses
Under regulations prescribed by the Secretary, no tax shall be imposed by section 4481 on the use of any bus which is of the transit type (rather than of the intercity type) by a person who, for the last 3 months of the preceding year (or for such other period as the Secretary may by regulations prescribe for purposes of this subsection), met the 60-percent passenger fare revenue test set forth in section 6421(b)(2) (as in effect on the day before the date of the enactment of the Energy Tax Act of 1978) as applied to the period prescribed for purposes of this subsection.
(d) Exemption for trucks used for less than 5,000 miles on public highways
(1) Suspension of tax
(A) In general
If—
(i) it is reasonable to expect that the use of any highway motor vehicle on public highways during any taxable period will be less than 5,000 miles, and
(ii) the owner of such vehicle furnishes such information as the Secretary may by forms or regulations require with respect to the expected use of such vehicle,
then the collection of the tax imposed by section 4481 with respect to the use of such vehicle shall be suspended during the taxable period.
(B) Suspension ceases to apply where use exceeds 5,000 miles
Subparagraph (A) shall cease to apply with respect to any highway motor vehicle whenever the use of such vehicle on public highways during the taxable period exceeds 5,000 miles.
(2) Exemption
If—
(A) the collection of the tax imposed by section 4481 with respect to any highway motor vehicle is suspended under paragraph (1),
(B) such vehicle is not used during the taxable period on public highways for more than 5,000 miles, and
(C) except as otherwise provided in regulations, the owner of such vehicle furnishes such information as the Secretary may require with respect to the use of such vehicle during the taxable period,
then no tax shall be imposed by section 4481 on the use of such vehicle for the taxable period.
(3) Refund where tax paid and vehicle not used for more than 5,000 miles
If—
(A) the tax imposed by section 4481 is paid with respect to any highway motor vehicle for any taxable period, and
(B) the requirements of subparagraphs (B) and (C) of paragraph (2) are met with respect to such taxable period,
the amount of such tax shall be credited or refunded (without interest) to the person who paid such tax.
(4) Relief from liability for tax under certain circumstances where truck is transferred
Under regulations prescribed by the Secretary, the owner of a highway motor vehicle with respect to which the collection of the tax imposed by section 4481 is suspended under paragraph (1) shall not be liable for the tax imposed by section 4481 (and the new owner shall be liable for such tax) with respect to such vehicle if—
(A) such vehicle is transferred to a new owner,
(B) such suspension is in effect at the time of such transfer, and
(C) the old owner furnishes such information as the Secretary by forms and regulations requires with respect to the transfer of such vehicle.
(5) 7,500-miles exemption for agricultural vehicles
(A) In general
In the case of an agricultural vehicle, paragraphs (1) and (2) shall be applied by substituting "7,500" for "5,000" each place it appears.
(B) Definitions
For purposes of this paragraph—
(i) Agricultural vehicle
The term "agricultural vehicle" means any highway motor vehicle—
(I) used primarily for farming purposes, and
(II) registered (under the laws of the State in which such vehicle is required to be registered) as a highway motor vehicle used for farming purposes.
(ii) Farming purposes
The term "farming purposes" means the transporting of any farm commodity to or from a farm or the use directly in agricultural production.
(iii) Farm commodity
The term "farm commodity" means any agricultural or horticultural commodity, feed, seed, fertilizer, livestock, bees, poultry, fur-bearing animals, or wildlife.
(6) Owner defined
For purposes of this subsection, the term "owner" means, with respect to any highway motor vehicle, the person described in section 4481(b).
(e) Reduction in tax for trucks used in logging
The tax imposed by section 4481 shall be reduced by 25 percent with respect to any highway motor vehicle if—
(1) the exclusive use of such vehicle during any taxable period is the transportation, to and from a point located on a forested site, of products harvested from such forested site, and
(2) such vehicle is registered (under the laws of the State in which such vehicle is required to be registered) as a highway motor vehicle used in the transportation of harvested forest products.
[(f) Repealed. Pub. L. 108–357, title VIII, §867(d), Oct. 22, 2004, 118 Stat. 1622 ]
(g) Exemption for mobile machinery
No tax shall be imposed by section 4481 on the use of any vehicle described in section 4053(8).
(h) Exemption for vehicles used in blood collection
(1) In general
No tax shall be imposed by section 4481 on the use of any qualified blood collector vehicle by a qualified blood collector organization.
(2) Qualified blood collector vehicle
For purposes of this subsection, the term "qualified blood collector vehicle" means a vehicle at least 80 percent of the use of which during the prior taxable period was by a qualified blood collector organization in the collection, storage, or transportation of blood.
(3) Special rule for vehicles first placed in service in a taxable period
In the case of a vehicle first placed in service in a taxable period, a vehicle shall be treated as a qualified blood collector vehicle for such taxable period if such qualified blood collector organization certifies to the Secretary that the organization reasonably expects at least 80 percent of the use of such vehicle by the organization during such taxable period will be in the collection, storage, or transportation of blood.
(4) Qualified blood collector organization
The term "qualified blood collector organization" has the meaning given such term by section 7701(a)(49).
(i) Termination of exemptions
Subsections (a) and (c) shall not apply on and after October 1, 2029.
(Added June 29, 1956, ch. 462, title II, §206(a),
Editorial Notes
References in Text
The date of the enactment of the Energy Tax Act of 1978, referred to in subsec. (c), is the date of enactment of
Amendments
2021—Subsec. (i).
2015—Subsec. (i).
2012—Subsec. (i).
2011—Subsec. (i).
2006—Subsecs. (h), (i).
2005—Subsec. (h).
2004—Subsec. (f).
Subsecs. (g), (h).
1998—Subsec. (g).
1991—Subsec. (g).
1990—Subsec. (g).
1987—Subsec. (f).
Subsec. (g).
1984—Subsec. (d)(5), (6).
Subsecs. (e), (f).
1983—Subsec. (d).
Subsec. (e).
1978—Subsec. (c).
1976—Subsecs. (a), (c).
Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective and Termination Dates of 2012 Amendment
Amendment by
Amendment by
Amendment by
Amendment by
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by section 867(d) of
Effective Date of 1987 Amendment
Amendment by section 507(b) of
Effective Date of 1984 Amendment
Effective Date of 1983 Amendment
Amendment by section 513(b) of
Effective Date of 1978 Amendment
Amendment by
Special Rules in the Case of Small Owner-Operators
Amendment by section 513(b) of
§4484. Cross references
(1) For penalties and administrative provisions applicable to this subchapter, see subtitle F.
(2) For exemption for uses by Indian tribal governments (or their subdivisions), see section 7871.
(Added June 29, 1956, ch. 462, title II, §206(a),
Editorial Notes
Amendments
1983—
Statutory Notes and Related Subsidiaries
Effective Date of 1983 Amendment
For effective date of amendment by
Effective Date
Section effective June 29, 1956, see section 211 of act June 29, 1956, set out as an Effective Date of 1956 Amendment note under
[Subchapter E—Repealed]
[§§4491 to 4494. Repealed. Pub. L. 97–248, title II, §280(c)(1), Sept. 3, 1982, 96 Stat. 564 ]
Section 4491, added
Section 4492, added
Section 4493, added
Section 4494, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable with respect to transportation beginning after Aug. 31, 1982, but inapplicable to amounts paid on or before such date, see section 280(d) of
Tax on Use of Aircraft
[Subchapter F—Repealed]
[§§4495 to 4498. Repealed. Pub. L. 105–34, title XIV, §1432(b)(1), Aug. 5, 1997, 111 Stat. 1050 ]
Section 4495, added
Section 4496, added
Section 4497, added
Section 4498, added
CHAPTER 37 —REPURCHASE OF CORPORATE STOCK
Editorial Notes
Prior Provisions
A prior
§4501. Repurchase of corporate stock
(a) General rule
There is hereby imposed on each covered corporation a tax equal to 1 percent of the fair market value of any stock of the corporation which is repurchased by such corporation during the taxable year.
(b) Covered corporation
For purposes of this section, the term "covered corporation" means any domestic corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).
(c) Repurchase
For purposes of this section—
(1) In general
The term "repurchase" means—
(A) a redemption within the meaning of section 317(b) with regard to the stock of a covered corporation, and
(B) any transaction determined by the Secretary to be economically similar to a transaction described in subparagraph (A).
(2) Treatment of purchases by specified affiliates
(A) In general
The acquisition of stock of a covered corporation by a specified affiliate of such covered corporation, from a person who is not the covered corporation or a specified affiliate of such covered corporation, shall be treated as a repurchase of the stock of the covered corporation by such covered corporation.
(B) Specified affiliate
For purposes of this section, the term "specified affiliate" means, with respect to any corporation—
(i) any corporation more than 50 percent of the stock of which is owned (by vote or by value), directly or indirectly, by such corporation, and
(ii) any partnership more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by such corporation.
(3) Adjustment
The amount taken into account under subsection (a) with respect to any stock repurchased by a covered corporation shall be reduced by the fair market value of any stock issued by the covered corporation during the taxable year, including the fair market value of any stock issued or provided to employees of such covered corporation or employees of a specified affiliate of such covered corporation during the taxable year, whether or not such stock is issued or provided in response to the exercise of an option to purchase such stock.
(d) Special rules for acquisition of stock of certain foreign corporations
(1) In general
In the case of an acquisition of stock of an applicable foreign corporation by a specified affiliate of such corporation (other than a foreign corporation or a foreign partnership (unless such partnership has a domestic entity as a direct or indirect partner)) from a person who is not the applicable foreign corporation or a specified affiliate of such applicable foreign corporation, for purposes of this section—
(A) such specified affiliate shall be treated as a covered corporation with respect to such acquisition,
(B) such acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and
(C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such specified affiliate to employees of the specified affiliate.
(2) Surrogate foreign corporations
In the case of a repurchase of stock of a covered surrogate foreign corporation by such covered surrogate foreign corporation, or an acquisition of stock of a covered surrogate foreign corporation by a specified affiliate of such corporation, for purposes of this section—
(A) the expatriated entity with respect to such covered surrogate foreign corporation shall be treated as a covered corporation with respect to such repurchase or acquisition,
(B) such repurchase or acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and
(C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such expatriated entity to employees of the expatriated entity.
(3) Definitions
For purposes of this subsection—
(A) Applicable foreign corporation
The term "applicable foreign corporation" means any foreign corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).
(B) Covered surrogate foreign corporation
The term "covered surrogate foreign corporation" means any surrogate foreign corporation (as determined under section 7874(a)(2)(B) by substituting "September 20, 2021" for "March 4, 2003" each place it appears) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), but only with respect to taxable years which include any portion of the applicable period with respect to such corporation under section 7874(d)(1).
(C) Expatriated entity
The term "expatriated entity" has the meaning given such term by section 7874(a)(2)(A).
(e) Exceptions
Subsection (a) shall not apply—
(1) to the extent that the repurchase is part of a reorganization (within the meaning of section 368(a)) and no gain or loss is recognized on such repurchase by the shareholder under
(2) in any case in which the stock repurchased is, or an amount of stock equal to the value of the stock repurchased is, contributed to an employer-sponsored retirement plan, employee stock ownership plan, or similar plan,
(3) in any case in which the total value of the stock repurchased during the taxable year does not exceed $1,000,000,
(4) under regulations prescribed by the Secretary, in cases in which the repurchase is by a dealer in securities in the ordinary course of business,
(5) to repurchases by a regulated investment company (as defined in section 851) or a real estate investment trust, or
(6) to the extent that the repurchase is treated as a dividend for purposes of this title.
(f) Regulations and guidance
The Secretary shall prescribe such regulations and other guidance as are necessary or appropriate to carry out, and to prevent the avoidance of, the purposes of this section, including regulations and other guidance—
(1) to prevent the abuse of the exceptions provided by subsection (e),
(2) to address special classes of stock and preferred stock, and
(3) for the application of the rules under subsection (d).
(Added
Editorial Notes
Prior Provisions
Prior sections 4501 to 4503 were repealed by
Section 4501, acts Aug. 16, 1954, ch. 736,
Section 4502, acts Aug. 16, 1954, ch. 736,
Section 4503, act Aug. 16, 1954, ch. 736,
Prior sections 4504 and 4511 to 4514 were repealed by
Section 4504, acts Aug. 16, 1954, ch. 736,
Section 4511, act Aug. 16, 1954, ch. 736,
Section 4512, act Aug. 16, 1954, ch. 736,
Section 4513, act Aug. 16, 1954, ch. 736,
Section 4514, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date
[CHAPTER 38 —REPEALED] 1
1 A new
[§4521. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Section, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4531, 4532. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4541, 4542. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4551 to 4553. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4561, 4562. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4571, 4572. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4581, 4582. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Sections, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
[§§4591 to 4597. Repealed. Pub. L. 94–455, title XIX, §1904(a)(15), Oct. 4, 1976, 90 Stat. 1814 ]
Sections, comprising subchapter F, "Oleomargarine", were struck out in the repeal of this chapter by
Section 4591, act Aug. 16, 1954, ch. 736,
Section 4592, act Aug. 16, 1954, ch. 736,
Section 4593, act Aug. 16, 1954, ch. 736,
Section 4594, act Aug. 16, 1954, ch. 736,
Section 4595, act Aug. 16, 1954, ch. 736,
Section 4596, act Aug. 16, 1954, ch. 736,
Section 4597, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1904(d) of
[§§4601 to 4603. Repealed. Pub. L. 87–456, title III, §302(d), May 24, 1962, 76 Stat. 77 ]
Section 4601, acts Aug. 16, 1954, ch. 736,
Sections 4602, 4603, act Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, see section 501(a) of
CHAPTER 38 —ENVIRONMENTAL TAXES
Editorial Notes
Prior Provisions
A prior
Amendments
1989—
1986—
1980—
1 Section numbers editorially supplied.
Subchapter A—Tax on Petroleum
§4611. Imposition of tax
(a) General Rule
There is hereby imposed a tax at the rate specified in subsection (c) on—
(1) crude oil received at a United States refinery, and
(2) petroleum products entered into the United States for consumption, use, or warehousing.
(b) Tax on certain uses and exportation
(1) In general
If—
(A) any domestic crude oil is used in or exported from the United States, and
(B) before such use or exportation, no tax was imposed on such crude oil under subsection (a),
then a tax at the rate specified in subsection (c) is hereby imposed on such crude oil.
(2) Exception for use on premises where produced
Paragraph (1) shall not apply to any use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced.
(c) Rate of tax
(1) In general
The rate of the taxes imposed by this section is the sum of—
(A) the Hazardous Substance Superfund financing rate, and
(B) the Oil Spill Liability Trust Fund financing rate.
(2) Rates
For purposes of paragraph (1)—
(A) the Hazardous Substance Superfund financing rate is 16.4 cents a barrel, and
(B) the Oil Spill Liability Trust Fund financing rate is—
(i) in the case of crude oil received or petroleum products entered before January 1, 2017, 8 cents a barrel, and
(ii) in the case of crude oil received or petroleum products entered after December 31, 2016, 9 cents a barrel.
(3) Adjustment for inflation
(A) In general
In the case of a year beginning after 2023, the amount in paragraph (2)(A) shall be increased by an amount equal to—
(i) such amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting "calendar year 2022" for "calendar year 2016" in subparagraph (A)(ii) thereof.
(B) Rounding
If any amount as adjusted under subparagraph (A) is not a multiple of $0.01, such amount shall be rounded to the next lowest multiple of $0.01.
(d) Persons liable for tax
(1) Crude oil received at refinery
The tax imposed by subsection (a)(1) shall be paid by the operator of the United States refinery.
(2) Imported petroleum product
The tax imposed by subsection (a)(2) shall be paid by the person entering the product for consumption, use, or warehousing.
(3) Tax on certain uses or exports
The tax imposed by subsection (b) shall be paid by the person using or exporting the crude oil, as the case may be.
[(e) Repealed. Pub. L. 117–169, title I, §13601(a)(1), Aug. 16, 2022, 136 Stat. 1981 ]
(f) Application of Oil Spill Liability Trust Fund financing rate
(1) In general
Except as provided in paragraph (2), the Oil Spill Liability Trust Fund financing rate under subsection (c) shall apply on and after April 1, 2006, or if later, the date which is 30 days after the last day of any calendar quarter for which the Secretary estimates that, as of the close of that quarter, the unobligated balance in the Oil Spill Liability Trust Fund is less than $2,000,000,000.
(2) Termination
The Oil Spill Liability Trust Fund financing rate shall not apply after December 31, 2025.
(Added
Editorial Notes
Codification
Amendments by
Amendments
2022—Subsec. (c)(2)(A).
Subsec. (c)(3).
Subsec. (e).
2020—Subsec. (f)(2).
2019—Subsec. (f)(2).
2018—Subsec. (f)(2).
2014—Subsec. (e)(2)(B).
Subsec. (e)(3)(A).
2008—Subsec. (c)(2)(B).
Subsec. (f)(1).
Subsec. (f)(2), (3).
2005—Subsec. (f).
"(1)
"(2)
1990—Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (e)(3).
Subsec. (e)(3)(A).
Subsec. (e)(3)(B).
1989—Subsec. (c)(2)(A).
"(i) except as provided in clause (ii), 8.2 cents a barrel, and
"(ii) 11.7 cents a barrel in the case of the tax imposed by subsection (a)(2), and".
Subsec. (c)(2)(B).
Subsec. (f).
1988—Subsec. (f)(2)(B).
1986—Subsecs. (a), (b)(1).
Subsec. (c).
"(1)
"(2)
Subsec. (d).
Subsec. (e).
"(1) the unobligated balance in the Hazardous Substance Response Trust Fund as of such date exceeds $900,000,000, and
"(2) the Secretary, after consultation with the Administrator of the Environmental Protection Agency, determines that such unobligated balance will exceed $500,000,000 on September 30 of the following year if no tax is imposed under section 4611 or 4661 during the calendar year following the date referred to above,
then no tax shall be imposed by this section during the first calendar year beginning after the date referred to in paragraph (1)."
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date of 1989 Amendment
Effective Date of 1986 Amendments
"(1)
"(2)
[
Effective Date
Short Title
For short title of title II of
§4612. Definitions and special rules
(a) Definitions
For purposes of this subchapter—
(1) Crude oil
The term "crude oil" includes crude oil condensates and natural gasoline.
(2) Domestic crude oil
The term "domestic crude oil" means any crude oil produced from a well located in the United States.
(3) Petroleum product
The term "petroleum product" includes crude oil.
(4) United States
(A) In general
The term "United States" means the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands.
(B) United States includes continental shelf areas
The principles of section 638 shall apply for purposes of the term "United States".
(C) United States includes foreign trade zones
The term "United States" includes any foreign trade zone of the United States.
(5) United States refinery
The term "United States refinery" means any facility in the United States at which crude oil is refined.
(6) Refineries which produce natural gasoline
In the case of any United States refinery which produces natural gasoline from natural gas, the gasoline so produced shall be treated as received at such refinery at the time so produced.
(7) Premises
The term "premises" has the same meaning as when used for purposes of determining gross income from the property under section 613.
(8) Barrel
The term "barrel" means 42 United States gallons.
(9) Fractional part of barrel
In the case of a fraction of a barrel, the tax imposed by section 4611 shall be the same fraction of the amount of such tax imposed on a whole barrel.
(b) Only 1 tax imposed with respect to any product
No tax shall be imposed by section 4611 with respect to any petroleum product if the person who would be liable for such tax establishes that a prior tax imposed by such section has been imposed with respect to such product.
(c) Credit where crude oil returned to pipeline
Under regulations prescribed by the Secretary, if an operator of a United States refinery—
(1) removes crude oil from a pipeline, and
(2) returns a portion of such crude oil into a stream of other crude oil in the same pipeline,
there shall be allowed as a credit against the tax imposed by section 4611 to such operator an amount equal to the product of the rate of tax imposed by section 4611 on the crude oil so removed by such operator and the number of barrels of crude oil returned by such operator to such pipeline. Any crude oil so returned shall be treated for purposes of this subchapter as crude oil on which no tax has been imposed by section 4611.
(d) Credit against portion of tax attributable to oil spill rate
There shall be allowed as a credit against so much of the tax imposed by section 4611 as is attributable to the Oil Spill Liability Trust Fund financing rate for any period an amount equal to the excess of—
(1) the sum of—
(A) the aggregate amounts paid by the taxpayer before January 1, 1987, into the Deepwater Port Liability Trust Fund and the Offshore Oil Pollution Compensation Fund, and
(B) the interest accrued on such amounts before such date, over
(2) the amount of such payments taken into account under this subsection for all prior periods.
The preceding sentence shall also apply to amounts paid by the taxpayer into the Trans-Alaska Pipeline Liability Fund to the extent of amounts transferred from such Fund into the Oil Spill Liability Trust Fund. For purposes of this subsection, all taxpayers which would be members of the same affiliated group (as defined in section 1504(a)) if section 1504(a)(2) were applied by substituting "100 percent" for "80 percent" shall be treated as 1 taxpayer.
(e) Income tax credit for unused payments into Trans-Alaska Pipeline Liability Fund
(1) In general
For purposes of section 38, the current year business credit shall include the credit determined under this subsection.
(2) Determination of credit
(A) In general
The credit determined under this subsection for any taxable year is an amount equal to the aggregate credit which would be allowed to the taxpayer under subsection (d) for amounts paid into the Trans-Alaska Pipeline Liability Fund had the Oil Spill Liability Trust Fund financing rate not ceased to apply.
(B) Limitation
(i) In general
The amount of the credit determined under this subsection for any taxable year with respect to any taxpayer shall not exceed the excess of—
(I) the amount determined under clause (ii), over
(II) the aggregate amount of the credit determined under this subsection for prior taxable years with respect to such taxpayer.
(ii) Overall limitation
The amount determined under this clause with respect to any taxpayer is the excess of—
(I) the aggregate amount of credit which would have been allowed under subsection (d) to the taxpayer for periods before the termination date specified in section 4611(f)(1), if amounts in the Trans-Alaska Pipeline Liability Fund which are actually transferred into the Oil Spill Liability Fund were transferred on January 1, 1990, and the Oil Spill Liability Trust Fund financing rate did not terminate before such termination date, over
(II) the aggregate amount of the credit allowed under subsection (d) to the taxpayer.
(3) Cost of income tax credit borne by Trust Fund
(A) In general
The Secretary shall from time to time transfer from the Oil Spill Liability Trust Fund to the general fund of the Treasury amounts equal to the credits allowed by reason of this subsection.
(B) Trust Fund balance may not be reduced below $1,000,000,000
Transfers may be made under subparagraph (A) only to the extent that the unobligated balance of the Oil Spill Liability Trust Fund exceeds $1,000,000,000. If any transfer is not made by reason of the preceding sentence, such transfer shall be made as soon as permitted under such sentence.
(4) No carryback
No portion of the unused business credit for any taxable year which is attributable to the credit determined under this subsection may be carried to a taxable year beginning on or before the date of the enactment of this paragraph.
(f) Disposition of revenues from Puerto Rico and the Virgin Islands
The provisions of subsections (a)(3) and (b)(3) of section 7652 shall not apply to any tax imposed by section 4611.
(Added
Editorial Notes
References in Text
The date of the enactment of this paragraph, referred to in subsec. (e)(4), is the date of the enactment of
Codification
Amendments by
Amendments
2018—Subsec. (e)(2)(B)(ii)(I).
1992—Subsecs. (e), (f).
1990—Subsec. (d).
1989—Subsec. (d).
1986—Subsec. (c).
Subsec. (d).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1986 Amendments
Amendment by
Amendment by
Executive Documents
Termination of Trust Territory of the Pacific Islands
For termination of Trust Territory of the Pacific Islands, see note set out preceding
Subchapter B—Tax on Certain Chemicals
§4661. Imposition of tax
(a) General rule
There is hereby imposed a tax on any taxable chemical sold by the manufacturer, producer, or importer thereof.
(b) Amount of Tax
The amount of tax imposed by subsection (a) shall be determined in accordance with the following table:
| In the case of: | The tax is the following amount per ton: |
|---|---|
| Acetylene | $9.74 |
| Benzene | 9.74 |
| Butane | 9.74 |
| Butylene | 9.74 |
| Butadiene | 9.74 |
| Ethylene | 9.74 |
| Methane | 6.88 |
| Napthalene | 9.74 |
| Propylene | 9.74 |
| Toluene | 9.74 |
| Xylene | 9.74 |
| Ammonia | 5.28 |
| Antimony | 8.90 |
| Antimony trioxide | 7.50 |
| Arsenic | 8.90 |
| Arsenic trioxide | 6.82 |
| Barium sulfide | 4.60 |
| Bromine | 8.90 |
| Cadmium | 8.90 |
| Chlorine | 5.40 |
| Chromium | 8.90 |
| Chromite | 3.04 |
| Potassium dichromate | 3.38 |
| Sodium dichromate | 3.74 |
| Cobalt | 8.90 |
| Cupric sulfate | 3.74 |
| Cupric oxide | 7.18 |
| Cuprous oxide | 7.94 |
| Hydrochloric acid | 0.58 |
| Hydrogen fluoride | 8.46 |
| Lead oxide | 8.28 |
| Mercury | 8.90 |
| Nickel | 8.90 |
| Phosphorus | 8.90 |
| Stannous chloride | 5.70 |
| Stannic chloride | 4.24 |
| Zinc chloride | 4.44 |
| Zinc sulfate | 3.80 |
| Potassium hydroxide | 0.44 |
| Sodium hydroxide | 0.56 |
| Sulfuric acid | 0.52 |
| Nitric acid | 0.48. |
(c) Termination
No tax shall be imposed by this section after December 31, 2031.
(Added
Editorial Notes
Codification
Amendment by
Amendments
2021—Subsec. (b).
Subsec. (c).
1986—Subsec. (b).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 1986 Amendments
Amendment by
"(1)
"(2)
"(A)
"(i)
"(ii)
"(B)
"(C)
"(3)
"(A)
"(B)
"(C)
"(D)
"(4)
"(5)
"(A)
"(B)
"(C)
"(D)
Effective Date
Subchapter effective Apr. 1, 1981, see section 211(c) of
§4662. Definitions and special rules
(a) Definitions
For purposes of this subchapter—
(1) Taxable chemical
Except as provided in subsection (b), the term "taxable chemical" means any substance—
(A) which is listed in the table under section 4661(b), and
(B) which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.
(2) United States
The term "United States" has the meaning given such term by section 4612(a)(4).
(3) Importer
The term "importer" means the person entering the taxable chemical for consumption, use, or warehousing.
(4) Ton
The term "ton" means 2,000 pounds. In the case of any taxable chemical which is a gas, the term "ton" means the amount of such gas in cubic feet which is the equivalent of 2,000 pounds on a molecular weight basis.
(5) Fractional part of ton
In the case of a fraction of a ton, the tax imposed by section 4661 shall be the same fraction of the amount of such tax imposed on a whole ton.
(b) Exceptions; other special rules
For purposes of this subchapter—
(1) Methane or butane used as a fuel
Under regulations prescribed by the Secretary, methane or butane shall be treated as a taxable chemical only if it is used otherwise than as a fuel or in the manufacture or production of any motor fuel, diesel fuel, aviation fuel, or jet fuel (and, for purposes of section 4661(a), the person so using it shall be treated as the manufacturer thereof).
(2) Substances used in the production of fertilizer
(A) In general
In the case of nitric acid, sulfuric acid, ammonia, or methane used to produce ammonia which is a qualified fertilizer substance, no tax shall be imposed under section 4661(a).
(B) Qualified fertilizer substance
For purposes of this section, the term "qualified fertilizer substance" means any substance—
(i) used in a qualified fertilizer use by the manufacturer, producer, or importer,
(ii) sold for use by any purchaser in a qualified fertilizer use, or
(iii) sold for resale by any purchaser for use, or resale for ultimate use, in a qualified fertilizer use.
(C) Qualified fertilizer use
The term "qualified fertilizer use" means any use in the manufacture or production of fertilizer or for direct application as a fertilizer.
(D) Taxation of nonqualified sale or use
For purposes of section 4661(a), if no tax was imposed by such section on the sale or use of any chemical by reason of subparagraph (A), the first person who sells or uses such chemical other than in a sale or use described in subparagraph (A) shall be treated as the manufacturer of such chemical.
(3) Sulfuric acid produced as a byproduct of air pollution control
In the case of sulfuric acid produced solely as a byproduct of and on the same site as air pollution control equipment, no tax shall be imposed under section 4661.
(4) Substances derived from coal
For purposes of this subchapter, the term "taxable chemical" shall not include any substance to the extent derived from coal.
(5) Substances used in the production of motor fuel, etc.
(A) In general
In the case of any chemical described in subparagraph (D) which is a qualified fuel substance, no tax shall be imposed under section 4661(a).
(B) Qualified fuel substance
For purposes of this section, the term "qualified fuel substance" means any substance—
(i) used in a qualified fuel use by the manufacturer, producer, or importer,
(ii) sold for use by any purchaser in a qualified fuel use, or
(iii) sold for resale by any purchaser for use, or resale for ultimate use, in a qualified fuel use.
(C) Qualified fuel use
For purposes of this subsection, the term "qualified fuel use" means—
(i) any use in the manufacture or production of any motor fuel, diesel fuel, aviation fuel, or jet fuel, or
(ii) any use as such a fuel.
(D) Chemicals to which paragraph applies
For purposes of this subsection, the chemicals described in this subparagraph are acetylene, benzene, butylene, butadiene, ethylene, naphthalene, propylene, toluene, and xylene.
(E) Taxation of nonqualified sale or use
For purposes of section 4661(a), if no tax was imposed by such section on the sale or use of any chemical by reason of subparagraph (A), the first person who sells or uses such chemical other than in a sale or use described in subparagraph (A) shall be treated as the manufacturer of such chemical.
(6) Substance having transitory presence during refining process, etc.
(A) In general
No tax shall be imposed under section 4661(a) on any taxable chemical described in subparagraph (B) by reason of the transitory presence of such chemical during any process of smelting, refining, or otherwise extracting any substance not subject to tax under section 4661(a).
(B) Chemicals to which subparagraph (A) applies
The chemicals described in this subparagraph are—
(i) barium sulfide, cupric sulfate, cupric oxide, cuprous oxide, lead oxide, zinc chloride, and zinc sulfate, and
(ii) any solution or mixture containing any chemical described in clause (i).
(C) Removal treated as use
Nothing in subparagraph (A) shall be construed to apply to any chemical which is removed from or ceases to be part of any smelting, refining, or other extraction process.
(7) Special rule for xylene
Except in the case of any substance imported into the United States or exported from the United States, the term "xylene" does not include any separated isomer of xylene.
(8) Recycled chromium, cobalt, and nickel
(A) In general
No tax shall be imposed under section 4661(a) on any chromium, cobalt, or nickel which is diverted or recovered in the United States from any solid waste as part of a recycling process (and not as part of the original manufacturing or production process).
(B) Exemption not to apply while corrective action uncompleted
Subparagraph (A) shall not apply during any period that required corrective action by the taxpayer at the unit at which the recycling occurs is uncompleted.
(C) Required corrective action
For purposes of subparagraph (B), required corrective action shall be treated as uncompleted during the period—
(i) beginning on the date that the corrective action is required by the Administrator or an authorized State pursuant to—
(I) a final permit under section 3005 of the Solid Waste Disposal Act or a final order under section 3004 or 3008 of such Act, or
(II) a final order under section 106 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and
(ii) ending on the date the Administrator or such State (as the case may be) certifies to the Secretary that such corrective action has been completed.
(D) Special rule for groundwater treatment
In the case of corrective action requiring groundwater treatment, such action shall be treated as completed as of the close of the 10-year period beginning on the date such action is required if such treatment complies with the permit or order applicable under subparagraph (C)(i) throughout such period. The preceding sentence shall cease to apply beginning on the date such treatment ceases to comply with such permit or order.
(E) Solid waste
For purposes of this paragraph, the term "solid waste" has the meaning given such term by section 1004 of the Solid Waste Disposal Act, except that such term shall not include any byproduct, coproduct, or other waste from any process of smelting, refining, or otherwise extracting any metal.
(9) Substances used in the production of animal feed
(A) In general
In the case of—
(i) nitric acid,
(ii) sulfuric acid,
(iii) ammonia, or
(iv) methane used to produce ammonia,
which is a qualified animal feed substance, no tax shall be imposed under section 4661(a).
(B) Qualified animal feed substance
For purposes of this section, the term "qualified animal feed substance" means any substance—
(i) used in a qualified animal feed use by the manufacturer, producer, or importer,
(ii) sold for use by any purchaser in a qualified animal feed use, or
(iii) sold for resale by any purchaser for use, or resale for ultimate use, in a qualified animal feed use.
(C) Qualified animal feed use
The term "qualified animal feed use" means any use in the manufacture or production of animal feed or animal feed supplements, or of ingredients used in animal feed or animal feed supplements.
(D) Taxation of nonqualified sale or use
For purposes of section 4661(a), if no tax was imposed by such section on the sale or use of any chemical by reason of subparagraph (A), the 1st person who sells or uses such chemical other than in a sale or use described in subparagraph (A) shall be treated as the manufacturer of such chemical.
(10) Hydrocarbon streams containing mixtures of organic taxable chemicals
(A) In general
No tax shall be imposed under section 4661(a) on any organic taxable chemical while such chemical is part of an intermediate hydrocarbon stream containing one or more organic taxable chemicals.
(B) Removal, etc., treated as use
For purposes of this part, if any organic taxable chemical on which no tax was imposed by reason of subparagraph (A) is isolated, extracted, or otherwise removed from, or ceases to be part of, an intermediate hydrocarbon stream—
(i) such isolation, extraction, removal, or cessation shall be treated as use by the person causing such event, and
(ii) such person shall be treated as the manufacturer of such chemical.
(C) Registration requirement
Subparagraph (A) shall not apply to any sale of any intermediate hydrocarbon stream unless the registration requirements of clauses (i) and (ii) of subsection (c)(2)(B) are satisfied.
(D) Organic taxable chemical
For purposes of this paragraph, the term "organic taxable chemical" means any taxable chemical which is an organic substance.
(c) Use and certain exchanges by manufacturer, etc.
(1) Use treated as sale
Except as provided in subsections (b) and (e), if any person manufactures, produces, or imports any taxable chemical and uses such chemical, then such person shall be liable for tax under section 4661 in the same manner as if such chemical were sold by such person.
(2) Special rules for inventory exchanges
(A) In general
Except as provided in this paragraph, in any case in which a manufacturer, producer, or importer of a taxable chemical exchanges such chemical as part of an inventory exchange with another person—
(i) such exchange shall not be treated as a sale, and
(ii) such other person shall, for purposes of section 4661, be treated as the manufacturer, producer, or importer of such chemical.
(B) Registration requirement
Subparagraph (A) shall not apply to any inventory exchange unless—
(i) both parties are registered with the Secretary as manufacturers, producers, or importers of taxable chemicals, and
(ii) the person receiving the taxable chemical has, at such time as the Secretary may prescribe, notified the manufacturer, producer, or importer of such person's registration number and the internal revenue district in which such person is registered.
(C) Inventory exchange
For purposes of this paragraph, the term "inventory exchange" means any exchange in which 2 persons exchange property which is, in the hands of each person, property described in section 1221(a)(1).
(d) Refund or credit for certain uses
(1) In general
Under regulations prescribed by the Secretary, if—
(A) a tax under section 4661 was paid with respect to any taxable chemical, and
(B) such chemical was used by any person in the manufacture or production of any other substance which is a taxable chemical,
then an amount equal to the tax so paid shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by such section. In any case to which this paragraph applies, the amount of any such credit or refund shall not exceed the amount of tax imposed by such section on the other substance manufactured or produced (or which would have been imposed by such section on such other substance but for subsection (b) or (e) of this section).
(2) Use as fertilizer
Under regulations prescribed by the Secretary, if—
(A) a tax under section 4661 was paid with respect to nitric acid, sulfuric acid, ammonia, or methane used to make ammonia without regard to subsection (b)(2), and
(B) any person uses such substance as a qualified fertilizer substance,
then an amount equal to the excess of the tax so paid over the tax determined with regard to subsection (b)(2) shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by this section.
(3) Use as qualified fuel
Under regulations prescribed by the Secretary, if—
(A) a tax under section 4661 was paid with respect to any chemical described in subparagraph (D) of subsection (b)(5) without regard to subsection (b)(5), and
(B) any person uses such chemical as a qualified fuel substance,
then an amount equal to the excess of the tax so paid over the tax determined with regard to subsection (b)(5) shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by this section.
(4) Use in the production of animal feed
Under regulations prescribed by the Secretary, if—
(A) a tax under section 4661 was paid with respect to nitric acid, sulfuric acid, ammonia, or methane used to produce ammonia, without regard to subsection (b)(9), and
(B) any person uses such substance as a qualified animal feed substance,
then an amount equal to the excess of the tax so paid over the tax determined with regard to subsection (b)(9) shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by this section.
(e) Exemption for exports of taxable chemicals
(1) Tax-free sales
(A) In general
No tax shall be imposed under section 4661 on the sale by the manufacturer or producer of any taxable chemical for export, or for resale by the purchaser to a second purchaser for export.
(B) Proof of export required
Rules similar to the rules of section 4221(b) shall apply for purposes of subparagraph (A).
(2) Credit or refund where tax paid
(A) In general
Except as provided in subparagraph (B), if—
(i) tax under section 4661 was paid with respect to any taxable chemical, and
(ii)(I) such chemical was exported by any person, or
(II) such chemical was used as a material in the manufacture or production of a substance which was exported by any person and which, at the time of export, was a taxable substance (as defined in section 4672(a)),
credit or refund (without interest) of such tax shall be allowed or made to the person who paid such tax.
(B) Condition to allowance
No credit or refund shall be allowed or made under subparagraph (A) unless the person who paid the tax establishes that he—
(i) has repaid or agreed to repay the amount of the tax to the person who exported the taxable chemical or taxable substance (as so defined), or
(ii) has obtained the written consent of such exporter to the allowance of the credit or the making of the refund.
(3) Refunds directly to exporter
The Secretary shall provide, in regulations, the circumstances under which a credit or refund (without interest) of the tax under section 4661 shall be allowed or made to the person who exported the taxable chemical or taxable substance, where—
(A) the person who paid the tax waives his claim to the amount of such credit or refund, and
(B) the person exporting the taxable chemical or taxable substance provides such information as the Secretary may require in such regulations.
(4) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.
(f) Disposition of revenues from Puerto Rico and the Virgin Islands
The provisions of subsections (a)(3) and (b)(3) of section 7652 shall not apply to any tax imposed by section 4661.
(Added
Editorial Notes
References in Text
Sections 3005, 3004, and 3008 of the Solid Waste Disposal Act, referred to in subsec. (b)(8)(C)(i)(I), and section 1004 of that Act, referred to in subsec. (b)(8)(E), are classified to sections 6925, 6924, 6928, and 6903, respectively, of Title 42, The Public Health and Welfare.
Section 106 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, referred to in subsec. (b)(8)(C)(i)(II), is classified to
Amendments
1999—Subsec. (c)(2)(C).
1988—Subsec. (b)(10)(A).
Subsec. (e)(3), (4).
1986—Subsec. (b)(7).
Subsec. (b)(8).
Subsec. (b)(9).
Subsec. (b)(10).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(4).
Subsecs. (e), (f).
1984—Subsec. (b)(1).
Subsec. (b)(2)(A).
Subsec. (b)(2)(B) to (D).
Subsec. (b)(5), (6).
Subsec. (c).
Subsec. (d)(2)(B).
Subsec. (d)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
"(1)
"(2)
Subchapter C—Tax on Certain Imported Substances
Editorial Notes
Prior Provisions
A prior subchapter C related to tax on hazardous wastes, consisted of sections 4681 and 4682, prior to repeal by
§4671. Imposition of tax
(a) General rule
There is hereby imposed a tax on any taxable substance sold or used by the importer thereof.
(b) Amount of tax
(1) In general
Except as provided in paragraph (2), the amount of the tax imposed by subsection (a) with respect to any taxable substance shall be the amount of the tax which would have been imposed by section 4661 on the taxable chemicals used as materials in the manufacture or production of such substance if such taxable chemicals had been sold in the United States for use in the manufacture or production of such taxable substance.
(2) Rate where importer does not furnish information to Secretary
If the importer does not furnish to the Secretary (at such time and in such manner as the Secretary shall prescribe) sufficient information to determine under paragraph (1) the amount of the tax imposed by subsection (a) on any taxable substance, the amount of the tax imposed on such taxable substance shall be 10 percent of the appraised value of such substance as of the time such substance was entered into the United States for consumption, use, or warehousing.
(3) Authority to prescribe rate in lieu of paragraph (2) rate
The Secretary may prescribe for each taxable substance a tax which, if prescribed, shall apply in lieu of the tax specified in paragraph (2) with respect to such substance. The tax prescribed by the Secretary shall be equal to the amount of tax which would be imposed by subsection (a) with respect to the taxable substance if such substance were produced using the predominant method of production of such substance.
(c) Exemptions for substances taxed under sections 4611 and 4661
No tax shall be imposed by this section on the sale or use of any substance if tax is imposed on such sale or use under section 4611 or 4661.
(d) Tax-free sales, etc. for substances used as certain fuels or in the production of fertilizer or animal feed
Rules similar to the following rules shall apply for purposes of applying this section with respect to taxable substances used or sold for use as described in such rules:
(1) Paragraphs (2), (5), and (9) of section 4662(b) (relating to tax-free sales of chemicals used as fuel or in the production of fertilizer or animal feed).
(2) Paragraphs (2), (3), and (4) of section 4662(d) (relating to refund or credit of tax on certain chemicals used as fuel or in the production of fertilizer or animal feed).
(e) Termination
No tax shall be imposed by this section after December 31, 2031.
(Added
Editorial Notes
Amendments
2021—Subsec. (b)(2).
Subsec. (e).
1986—Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date
Study and Report
§4672. Definitions and special rules
(a) Taxable substance
For purposes of this subchapter—
(1) In general
The term "taxable substance" means any substance which, at the time of sale or use by the importer, is listed as a taxable substance by the Secretary for purposes of this subchapter.
(2) Determination of substances on list
A substance shall be listed under paragraph (1) if—
(A) the substance is contained in the list under paragraph (3), or
(B) the Secretary determines, in consultation with the Administrator of the Environmental Protection Agency and the Commissioner of U.S. Customs and Border Protection, that taxable chemicals constitute more than 20 percent of the weight (or more than 20 percent of the value) of the materials used to produce such substance (determined on the basis of the predominant method of production).
If an importer or exporter of any substance requests that the Secretary determine whether such substance be listed as a taxable substance under paragraph (1) or be removed from such listing, the Secretary shall make such determination within 180 days after the date the request was filed.
(3) Initial list of taxable substances
| Cumene | Methylene chloride |
| Styrene | Polypropylene |
| Ammonium nitrate | Propylene glycol |
| Nickel oxide | Formaldehyde |
| Isopropyl alcohol | Acetone |
| Ethylene glycol | Acrylonitrile |
| Vinyl chloride | Methanol |
| Polyethylene resins, total | Propylene oxide |
| Polybutadiene | Polypropylene resins |
| Styrene-butadiene, latex | Ethylene oxide |
| Styrene-butadiene, snpf | Ethylene dichloride |
| Synthetic rubber, not containing fillers | Cyclohexane |
| Urea | Isophthalic acid |
| Ferronickel | Maleic anhydride |
| Ferrochromium nov 3 pct | Phthalic anhydride |
| Ferrochrome ov 3 pct. carbon | Ethyl methyl ketone |
| Unwrought nickel | Chloroform |
| Nickel waste and scrap | Carbon tetrachloride |
| Wrought nickel rods and wire | Chromic acid |
| Nickel powders | Hydrogen peroxide |
| Phenolic resins | Polystyrene homopolymer resins |
| Polyvinylchloride resins | Melamine |
| Polystyrene resins and copolymers | Acrylic and methacrylic acid resins |
| Ethyl alcohol for nonbeverage use | Vinyl resins |
| Ethylbenzene | Vinyl resins, NSPF. |
(4) Modifications to list
The Secretary shall add to the list under paragraph (3) substances which meet either the weight or value tests of paragraph (2)(B) and may remove from such list only substances which meet neither of such tests.
(b) Other definitions
For purposes of this subchapter—
(1) Importer
The term "importer" means the person entering the taxable substance for consumption, use, or warehousing.
(2) Taxable chemicals; United States
The terms "taxable chemical" and "United States" have the respective meanings given such terms by section 4662(a).
(c) Disposition of revenues from Puerto Rico and the Virgin Islands
The provisions of subsections (a)(3) and (b)(3) of section 7652 shall not apply to any tax imposed by section 4671.
(Added
Editorial Notes
Amendments
2021—Subsec. (a)(2)(B).
1988—Subsec. (a)(2).
Subsec. (a)(2)(B).
Subsec. (a)(4).
"(A)
"(B)
Statutory Notes and Related Subsidiaries
Change of Name
"Commissioner of U.S. Customs and Border Protection" substituted for "Commissioner of Customs" in subsec. (a)(2)(B) on authority of section 802(d)(2) of
Effective Date of 2021 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date
Section effective Jan. 1, 1989, see section 515(c) of
Transfer of Functions
For transfer of functions, personnel, assets, and liabilities of the United States Customs Service of the Department of the Treasury, including functions of the Secretary of the Treasury relating thereto, to the Secretary of Homeland Security, and for treatment of related references, see
Presumption As a Taxable Substance for Prior Determinations
Publication of Initial List
Subchapter D—Ozone-Depleting Chemicals, Etc.
§4681. Imposition of tax
(a) General rule
There is hereby imposed a tax on—
(1) any ozone-depleting chemical sold or used by the manufacturer, producer, or importer thereof, and
(2) any imported taxable product sold or used by the importer thereof.
(b) Amount of tax
(1) Ozone-depleting chemicals
(A) In general
The amount of the tax imposed by subsection (a) on each pound of ozone-depleting chemical shall be an amount equal to—
(i) the base tax amount, multiplied by
(ii) the ozone-depletion factor for such chemical.
(B) Base tax amount
The base tax amount for purposes of subparagraph (A) with respect to any sale or use during any calendar year after 1995 shall be $5.35 increased by 45 cents for each year after 1995.
(2) Imported taxable product
(A) In general
The amount of the tax imposed by subsection (a) on any imported taxable product shall be the amount of tax which would have been imposed by subsection (a) on the ozone-depleting chemicals used as materials in the manufacture or production of such product if such ozone-depleting chemicals had been sold in the United States on the date of the sale of such imported taxable product.
(B) Certain rules to apply
Rules similar to the rules of paragraphs (2) and (3) of section 4671(b) shall apply.
(Added
Editorial Notes
Prior Provisions
A prior section 4681, added
Amendments
1997—Subsec. (b)(1)(B).
| "Calendar year: | Base tax amount: |
|---|---|
| 1993 | 3.35 |
| 1994 | 4.35 |
| 1995 | 5.35." |
Subsec. (b)(1)(C).
1992—Subsec. (b)(1)(B).
1990—Subsec. (b)(1)(B).
Subsec. (b)(1)(C).
Statutory Notes and Related Subsidiaries
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
Effective Date
"(1)
"(2)
"(3)
§4682. Definitions and special rules
(a) Ozone-depleting chemical
For purposes of this subchapter—
(1) In general
The term "ozone-depleting chemical" means any substance—
(A) which, at the time of the sale or use by the manufacturer, producer, or importer, is listed as an ozone-depleting chemical in the table contained in paragraph (2), and
(B) which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.
(2) Ozone-depleting chemicals
| Common name: | Chemical nomenclature: |
|---|---|
| CFC–11 | trichlorofluoromethane |
| CFC–12 | dichlorodifluoromethane |
| CFC–113 | trichlorotrifluoroethane |
| CFC–114 | 1,2-dichloro-1,1,2,2-tetra- fluoroethane |
| CFC–115 | chloropentafluoroethane |
| Halon-1211 | bromochlorodifluoro- methane |
| Halon-1301 | bromotrifluoromethane |
| Halon-2402 | dibromotetrafluoroethane |
| Carbon tetrachloride | Tetrachloromethane |
| Methyl chloroform | 1,1,1-trichloroethane |
| CFC–13 | CF3Cl |
| CFC–111 | C2FCl5 |
| CFC–112 | C2F2Cl4 |
| CFC–211 | C3FCl7 |
| CFC–212 | C3F2Cl6 |
| CFC–213 | C3F3Cl5 |
| CFC–214 | C3F4Cl4 |
| CFC–215 | C3F5Cl3 |
| CFC–216 | C3F6Cl2 |
| CFC–217 | C3F7Cl. |
(b) Ozone-depletion factor
For purposes of this subchapter, the term "ozone-depletion factor" means, with respect to an ozone-depleting chemical, the factor assigned to such chemical under the following table:
| Ozone-depleting chemical: | Ozone-depletion factor: |
|---|---|
| CFC–11 | 1.0 |
| CFC–12 | 1.0 |
| CFC–113 | 0.8 |
| CFC–114 | 1.0 |
| CFC–115 | 0.6 |
| Halon-1211 | 3.0 |
| Halon-1301 | 10.0 |
| Halon-2402 | 6.0 |
| Carbon tetrachloride | 1.1 |
| Methyl chloroform | 0.1 |
| CFC–13 | 1.0 |
| CFC–111 | 1.0 |
| CFC–112 | 1.0 |
| CFC–211 | 1.0 |
| CFC–212 | 1.0 |
| CFC–213 | 1.0 |
| CFC–214 | 1.0 |
| CFC–215 | 1.0 |
| CFC–216 | 1.0 |
| CFC–217 | 1.0. |
(c) Imported taxable product
For purposes of this subchapter—
(1) In general
The term "imported taxable product" means any product (other than an ozone-depleting chemical) entered into the United States for consumption, use, or warehousing if any ozone-depleting chemical was used as material in the manufacture or production of such product.
(2) De minimis exception
The term "imported taxable product" shall not include any product specified in regulations prescribed by the Secretary as using a de minimis amount of ozone-depleting chemicals as materials in the manufacture or production thereof. The preceding sentence shall not apply to any product in which any ozone-depleting chemical (other than methyl chloroform) is used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components.
(d) Exceptions
(1) Recycling
No tax shall be imposed by section 4681 on any ozone-depleting chemical which is diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process), or on any recycled Halon-1301 or recycled Halon-2402 imported from any country which is a signatory to the Montreal Protocol on Substances that Deplete the Ozone Layer.
(2) Use in further manufacture
(A) In general
No tax shall be imposed by section 4681—
(i) on the use of any ozone-depleting chemical in the manufacture or production of any other chemical if the ozone-depleting chemical is entirely consumed in such use,
(ii) on the sale by the manufacturer, producer, or importer of any ozone-depleting chemical—
(I) for a use by the purchaser which meets the requirements of clause (i), or
(II) for resale by the purchaser to a second purchaser for a use by the second purchaser which meets the requirements of clause (i).
Clause (ii) shall apply only if the manufacturer, producer, and importer, and the 1st and 2d purchasers (if any), meet such registration requirements as may be prescribed by the Secretary.
(B) Credit or refund
Under regulations prescribed by the Secretary, if—
(i) a tax under this subchapter was paid with respect to any ozone-depleting chemical, and
(ii) such chemical was used (and entirely consumed) by any person in the manufacture or production of any other chemical,
then an amount equal to the tax so paid shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by section 4681.
(3) Exports
(A) In general
Except as provided in subparagraph (B), rules similar to the rules of section 4662(e) (other than section 4662(e)(2)(A)(ii)(II)) shall apply for purposes of this subchapter.
(B) Limit on benefit
(i) In general
The aggregate tax benefit allowable under subparagraph (A) with respect to ozone-depleting chemicals manufactured, produced, or imported by any person during a calendar year shall not exceed the sum of—
(I) the amount equal to the 1986 export percentage of the aggregate tax which would (but for this subsection and subsection (g)) be imposed by this subchapter with respect to the maximum quantity of ozone-depleting chemicals permitted to be manufactured or produced by such person during such calendar year under regulations prescribed by the Environmental Protection Agency (other than chemicals with respect to which subclause (II) applies),
(II) the aggregate tax which would (but for this subsection and subsection (g)) be imposed by this subchapter with respect to any additional production allowance granted to such person with respect to ozone-depleting chemicals manufactured or produced by such person during such calendar year by the Environmental Protection Agency under 40 CFR Part 82 (as in effect on September 14, 1989), and
(III) the aggregate tax which was imposed by this subchapter with respect to ozone-depleting chemicals imported by such person during the calendar year.
(ii) 1986 export percentage
A person's 1986 export percentage is the percentage equal to the ozone-depletion factor adjusted pounds of ozone-depleting chemicals manufactured or produced by such person during 1986 which were exported during 1986, divided by the ozone-depletion factor adjusted pounds of all ozone-depleting chemicals manufactured or produced by such person during 1986. The percentage determined under the preceding sentence shall be computed by taking into account the sum of such person's direct 1986 exports (as determined by the Environmental Protection Agency) and such person's indirect 1986 exports (as allocated to such person by such Agency in determining such person's consumption and production rights for ozone-depleting chemicals).
(C) Separate application of limit for newly listed chemicals
(i) In general
Subparagraph (B) shall be applied separately with respect to newly listed chemicals and other chemicals.
(ii) Application to newly listed chemicals
In applying subparagraph (B) to newly listed chemicals—
(I) subparagraph (B) shall be applied by substituting "1989" for "1986" each place it appears, and
(II) clause (i)(II) thereof shall be applied by substituting for the regulations referred to therein any regulations (whether or not prescribed by the Secretary) which the Secretary determines are comparable to the regulations referred to in such clause with respect to newly listed chemicals.
(iii) Newly listed chemical
For purposes of this subparagraph, the term "newly listed chemical" means any substance which appears in the table contained in subsection (a)(2) below Halon-2402.
(e) Other definitions
For purposes of this subchapter—
(1) Importer
The term "importer" means the person entering the article for consumption, use, or warehousing.
(2) United States
The term "United States" has the meaning given such term by section 4612(a)(4).
(f) Special rules
(1) Fractional parts of a pound
In the case of a fraction of a pound, the tax imposed by this subchapter shall be the same fraction of the amount of such tax imposed on a whole pound.
(2) Disposition of revenues from Puerto Rico and the Virgin Islands
The provisions of subsections (a)(3) and (b)(3) of section 7652 shall not apply to any tax imposed by this subchapter.
(g) Chemicals used as propellants in metered-dose inhalers
(1) Exemption from tax
(A) In general
No tax shall be imposed by section 4681 on—
(i) any use of any substance as a propellant in metered-dose inhalers, or
(ii) any qualified sale by the manufacturer, producer, or importer of any substance.
(B) Qualified sale
For purposes of subparagraph (A), the term "qualified sale" means any sale by the manufacturer, producer, or importer of any substance—
(i) for use by the purchaser as a propellant in metered dose inhalers, or
(ii) for resale by the purchaser to a 2d purchaser for such use by the 2d purchaser.
The preceding sentence shall apply only if the manufacturer, producer, and importer, and the 1st and 2d purchasers (if any) meet such registration requirements as may be prescribed by the Secretary.
(2) Overpayments
If any substance on which tax was paid under this subchapter is used by any person as a propellant in metered-dose inhalers, credit or refund without interest shall be allowed to such person in an amount equal to the tax so paid. Amounts payable under the preceding sentence with respect to uses during the taxable year shall be treated as described in section 34(a) for such year unless claim thereof has been timely filed under this paragraph.
(h) Imposition of floor stocks taxes
(1) In general
(A) In general
If, on any tax-increase date, any ozone-depleting chemical is held by any person (other than the manufacturer, producer, or importer thereof) for sale or for use in further manufacture, there is hereby imposed a floor stocks tax.
(B) Amount of tax
The amount of the tax imposed by subparagraph (A) shall be the excess (if any) of—
(i) the tax which would be imposed under section 4681 on such substance if the sale of such chemical by the manufacturer, producer, or importer thereof had occurred on the tax-increase date, over
(ii) the prior tax (if any) imposed by this subchapter on such substance.
(C) Tax-increase date
For purposes of this paragraph, the term "tax-increase date" means January 1 of any calendar year.
(2) Due date
The taxes imposed by this subsection on January 1 of any calendar year shall be paid on or before June 30 of such year.
(3) Application of other laws
All other provisions of law, including penalties, applicable with respect to the taxes imposed by section 4681 shall apply to the floor stocks taxes imposed by this subsection.
(Added
Editorial Notes
Prior Provisions
A prior section 4682, added
Amendments
2014—Subsec. (h).
1997—Subsec. (d)(1).
Subsec. (g).
1996—Subsec. (d)(1).
Subsec. (g)(4).
1992—Subsec. (g)(2)(A).
Subsec. (g)(2)(B).
Subsec. (g)(4), (5).
Subsec. (h)(2)(C).
1990—Subsecs. (a)(2), (b).
Subsec. (c)(2).
Subsec. (d)(3)(B)(i).
Subsec. (d)(3)(B)(i)(I).
Subsec. (d)(3)(B)(i)(II).
Subsec. (d)(3)(B)(i)(III).
Subsec. (d)(3)(B)(ii).
Subsec. (d)(3)(C).
Subsec. (h)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
"(1)
"(A)
"(B)
"(2)
Effective Date of 1992 Amendment
Amendment by section 1931(b), (c) of
Effective Date of 1990 Amendment
Amendment by section 11203(a), (b), and (d) of
Amendment by section 11701(g) of
Certification System
Deposits for First Quarter of 1991
CHAPTER 39 —REGISTRATION-REQUIRED OBLIGATIONS
Editorial Notes
Prior Provisions
The provisions of a prior
Subchapter A, Narcotic Drugs and Marihuana, comprising sections 4701 to 4707, 4711 to 4716, 4721 to 4726, 4731 to 4736, 4741 to 4746, 4751 to 4757, 4761, 4762, and 4771 to 4776.
Subchapter B, White phosphorus matches, comprising sections 4801 to 4806.
Subchapter C, Adulterated butter and filled cheese, comprising sections 4811 to 4819, 4821, 4822, 4826, 4831 to 4836, 4841, 4842, and 4846.
Subchapter D, Cotton futures, comprising sections 4851 to 4854, 4861 to 4865, and 4871 to 4877.
Subchapter E, Circulation other than of national banks, comprising sections 4881 to 4886.
Subchapter F, Silver bullion, comprising sections 4891 to 4897.
Prior sections 4701 to 4897 were based on act Aug. 16, 1954, ch. 736,
Sections 4701–4776 were repealed by
Sections 4801–4826, 4851–4873, and 4875–4886 were repealed by
Sections 4831–4834 and 4836–4846 were repealed by
Section 4835 was repealed by
Section 4874 was repealed by
Sections 4891–4897 were repealed by
Amendments
1982—
§4701. Tax on issuer of registration-required obligation not in registered form
(a) Imposition of tax
In the case of any person who issues a registration-required obligation which is not in registered form, there is hereby imposed on such person on the issuance of such obligation a tax in an amount equal to the product of—
(1) 1 percent of the principal amount of such obligation, multiplied by
(2) the number of calendar years (or portions thereof) during the period beginning on the date of issuance of such obligation and ending on the date of maturity.
(b) Definitions
For purposes of this section—
(1) Registration-required obligation
(A) In general
The term "registration-required obligation" has the same meaning as when used in section 163(f), except that such term shall not include any obligation which—
(i) is required to be registered under section 149(a), or
(ii) is described in subparagraph (B).
(B) Certain obligations not included
An obligation is described in this subparagraph if—
(i) there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person,
(ii) interest on such obligation is payable only outside the United States and its possessions, and
(iii) on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws.
(2) Registered form
The term "registered form" has the same meaning as when used in section 163(f).
(Added
Editorial Notes
Amendments
2010—Subsec. (b)(1).
1986—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date
Section applicable to obligations issued after Dec. 31, 1982, with an exception for certain warrants, see section 310(d)(1), (3) of
CHAPTER 40 —GENERAL PROVISIONS RELATING TO OCCUPATIONAL TAXES
§4901. Payment of tax
(a) Condition precedent to carrying on certain business
No person shall be engaged in or carry on any trade or business subject to the tax imposed by section 4411 (wagering) until he has paid the special tax therefor.
(b) Computation
All special taxes shall be imposed as of on the first day of July in each year, or on commencing any trade or business on which such tax is imposed. In the former case the tax shall be reckoned for 1 year, and in the latter case it shall be reckoned proportionately, from the first day of the month in which the liability to a special tax commenced, to and including the 30th day of June following.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1978—Subsec. (a).
1976—Subsec. (c).
1970—Subsec. (a).
1965—Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Savings Provision
Prosecution for any violation of law occurring, and civil seizures or forfeitures and injunctive proceedings commenced, prior to the effective date of amendment of this section by section 1102 of
Persons Engaged in Activities on December 1, 1974, Requiring Payment of Wagering Tax
Person on Dec. 1, 1974, engaging in an activity making him liable for payment of tax imposed by
§4902. Liability of partners
Any number of persons doing business in copartnership at any one place shall be required to pay but one special tax.
(Aug. 16, 1954, ch. 736,
§4903. Liability in case of business in more than one location
The payment of the special tax imposed, other than the tax imposed by section 4411, shall not exempt from an additional special tax the person carrying on a trade or business in any other place than that stated in the register kept in the office of the official in charge of the internal revenue district; but nothing herein contained shall require a special tax for the storage of goods, wares, or merchandise in other places than the place of business, nor, except as provided in this subtitle, for the sale by manufacturers or producers of their own goods, wares, and merchandise, at the place of production or manufacture, and at their principal office or place of business, provided no goods, wares, or merchandise shall be kept except as samples at said office or place of business.
(Aug. 16, 1954, ch. 736,
§4904. Liability in case of different businesses of same ownership and location
Whenever more than one of the pursuits or occupations described in this subtitle are carried on in the same place by the same person at the same time, except as otherwise provided in this subtitle, the tax shall be paid for each according to the rates severally prescribed.
(Aug. 16, 1954, ch. 736,
§4905. Liability in case of death or change of location
(a) Requirements
When any person who has paid the special tax for any trade or business dies, his spouse or child, or executors or administrators or other legal representatives, may occupy the house or premises, and in like manner carry on, for the residue of the term for which the tax is paid, the same trade or business as the deceased before carried on, in the same house and upon the same premises, without the payment of any additional tax. When any person removes from the house or premises for which any trade or business was taxed to any other place, he may carry on the trade or business specified in the register kept in the office of the official in charge of the internal revenue district at the place to which he removes, without the payment of any additional tax: Provided, That all cases of death, change, or removal, as aforesaid, with the name of the successor to any person deceased, or of the person making such change or removal, shall be registered with the Secretary, under regulations to be prescribed by the Secretary.
(b) Registration
For registration in case of wagering, see section 4412.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1976—Subsec. (a).
Subsec. (b).
1970—Subsec. (b)(1).
1965—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1970 Amendment
Amendment by
Effective Date of 1965 Amendment
Savings Provision
Prosecutions for any violation of law occurring, and civil seizures or forfeitures and injunctive proceedings commenced, prior to the effective date of amendment of this section by section 1102 of
§4906. Application of State laws
The payment of any special tax imposed by this subtitle for carrying on any trade or business shall not be held to exempt any person from any penalty or punishment provided by the laws of any State for carrying on the same within such State, or in any manner to authorize the commencement or continuance of such trade or business contrary to the laws of such State or in places prohibited by municipal law; nor shall the payment of any such tax be held to prohibit any State from placing a duty or tax on the same trade or business, for State or other purposes.
(Aug. 16, 1954, ch. 736,
§4907. Federal agencies or instrumentalities
Any special tax imposed by this subtitle, except the tax imposed by section 4411, shall apply to any agency or instrumentality of the United States unless such agency or instrumentality is granted by statute a specific exemption from such tax.
(Aug. 16, 1954, ch. 736,
CHAPTER 41 —PUBLIC CHARITIES
Editorial Notes
Amendments
1987—
Prior Provisions
The provisions of a prior
Subchapter A, Acquisitions of foreign stock and debt obligations, comprising sections 4911 to 4920.
Subchapter B, Acquisition by commercial banks, comprising section 4931.
Prior sections 4911 to 4922 and 4931 were repealed by
The subject matter of the prior provisions is as follows:
Section 4911, added
Section 4912, added
Section 4913, added
Section 4914, added
Section 4915, added
Section 4916, added
Section 4917, added
Section 4918, added
Section 4919, added
Section 4920, added
Section 4921, added
Section 4922, added
Section 4931, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal of Prior Provisions
§4911. Tax on excess expenditures to influence legislation
(a) Tax imposed
(1) In general
There is hereby imposed on the excess lobbying expenditures of any organization to which this section applies a tax equal to 25 percent of the amount of the excess lobbying expenditures for the taxable year.
(2) Organizations to which this section applies
This section applies to any organization with respect to which an election under section 501(h) (relating to lobbying expenditures by public charities) is in effect for the taxable year.
(b) Excess lobbying expenditures
For purposes of this section, the term "excess lobbying expenditures" means, for a taxable year, the greater of—
(1) the amount by which the lobbying expenditures made by the organization during the taxable year exceed the lobbying nontaxable amount for such organization for such taxable year, or
(2) the amount by which the grass roots expenditures made by the organization during the taxable year exceed the grass roots nontaxable amount for such organization for such taxable year.
(c) Definitions
For purposes of this section—
(1) Lobbying expenditures
The term "lobbying expenditures" means expenditures for the purpose of influencing legislation (as defined in subsection (d)).
(2) Lobbying nontaxable amount
The lobbying nontaxable amount for any organization for any taxable year is the lesser of (A) $1,000,000 or (B) the amount determined under the following table:
| If the exempt purpose expenditures are— | The lobbying nontaxable amount is— |
|---|---|
| Not over $500,000 | 20 percent of the exempt purpose expenditures. |
| Over $500,000 but not over $1,000,000 | $100,000, plus 15 percent of the excess of the exempt purpose expenditures over $500,000. |
| Over $1,000,000 but not over $1,500,000 | $175,000 plus 10 percent of the excess of the exempt purpose expenditures over $1,000,000. |
| Over $1,500,000 | $225,000 plus 5 percent of the excess of the exempt purpose expenditures over $1,500,000. |
(3) Grass roots expenditures
The term "grass roots expenditures" means expenditures for the purpose of influencing legislation (as defined in subsection (d) without regard to paragraph (1)(B) thereof).
(4) Grass roots nontaxable amount
The grass roots nontaxable amount for any organization for any taxable year is 25 percent of the lobbying nontaxable amount (determined under paragraph (2)) for such organization for such taxable year.
(d) Influencing legislation
(1) General rule
Except as otherwise provided in paragraph (2), for purposes of this section, the term "influencing legislation" means—
(A) any attempt to influence any legislation through an attempt to affect the opinions of the general public or any segment thereof, and
(B) any attempt to influence any legislation through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of the legislation.
(2) Exceptions
For purposes of this section, the term "influencing legislation", with respect to an organization, does not include—
(A) making available the results of nonpartisan analysis, study, or research;
(B) providing of technical advice or assistance (where such advice would otherwise constitute the influencing of legislation) 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;
(C) appearances before, or communications to, any legislative body with respect to a possible decision of such body which might affect the existence of the organization, its powers and duties, tax-exempt status, or the deduction of contributions to the organization;
(D) communications between the organization and its bona fide members with respect to legislation or proposed legislation of direct interest to the organization and such members, other than communications described in paragraph (3); and
(E) any communication with a governmental official or employee, other than—
(i) a communication with a member or employee of a legislative body (where such communication would otherwise constitute the influencing of legislation), or
(ii) a communication the principal purpose of which is to influence legislation.
(3) Communications with members
(A) A communication between an organization and any bona fide member of such organization to directly encourage such member to communicate as provided in paragraph (1)(B) shall be treated as a communication described in paragraph (1)(B).
(B) A communication between an organization and any bona fide member of such organization to directly encourage such member to urge persons other than members to communicate as provided in either subparagraph (A) or subparagraph (B) of paragraph (1) shall be treated as a communication described in paragraph (1)(A).
(e) Other definitions and special rules
For purposes of this section—
(1) Exempt purpose expenditures
(A) In general
The term "exempt purpose expenditures" means, with respect to any organization for any taxable year, the total of the amounts paid or incurred by such organization to accomplish purposes described in section 170(c)(2)(B) (relating to religious, charitable, educational, etc., purposes).
(B) Certain amounts included
The term "exempt purpose expenditures" includes—
(i) administrative expenses paid or incurred for purposes described in section 170(c)(2)(B), and
(ii) amounts paid or incurred for the purpose of influencing legislation (whether or not for purposes described in section 170(c)(2)(B)).
(C) Certain amounts excluded
The term "exempt purpose expenditures" does not include amounts paid or incurred to or for—
(i) a separate fundraising unit of such organization, or
(ii) one or more other organizations, if such amounts are paid or incurred primarily for fundraising.
(2) Legislation
The term "legislation" includes action with respect to Acts, bills, resolutions, or similar items by the Congress, any State legislature, any local council, or similar governing body, or by the public in a referendum, initiative, constitutional amendment, or similar procedure.
(3) Action
The term "action" is limited to the introduction, amendment, enactment, defeat, or repeal of Acts, bills, resolutions, or similar items.
(4) Depreciation, etc., treated as expenditures
In computing expenditures paid or incurred for the purpose of influencing legislation (within the meaning of subsection (b)(1) or (b)(2)) or exempt purpose expenditures (as defined in paragraph (1)), amounts properly chargeable to capital account shall not be taken into account. There shall be taken into account a reasonable allowance for exhaustion, wear and tear, obsolescence, or amortization. Such allowance shall be computed only on the basis of the straight-line method of depreciation. For purposes of this section, a determination of whether an amount is properly chargeable to capital account shall be made on the basis of the principles that apply under subtitle A to amounts which are paid or incurred in a trade or business.
(f) Affiliated organizations
(1) In general
Except as otherwise provided in paragraph (4), if for a taxable year two or more organizations described in section 501(c)(3) are members of an affiliated group of organizations as defined in paragraph (2), and an election under section 501(h) is effective for at least one such organization for such year, then—
(A) the determination as to whether excess lobbying expenditures have been made and the determination as to whether the expenditure limits of section 501(h)(1) have been exceeded shall be made as though such affiliated group is one organization,
(B) if such group has excess lobbying expenditures, each such organization as to which an election under section 501(h) is effective for such year shall be treated as an organization which has excess lobbying expenditures in an amount which equals such organization's proportionate share of such group's excess lobbying expenditures,
(C) if the expenditure limits of section 501(h)(1) are exceeded, each such organization as to which an election under section 501(h) is effective for such year shall be treated as an organization which is not described in section 501(c)(3) by reason of the application of 501(h), and
(D) subparagraphs (C) and (D) of subsection (d)(2), paragraph (3) or subsection (d), and clause (i) of subsection (e)(1)(C) shall be applied as if such affiliated group were one organization.
(2) Definition of affiliation
For purposes of paragraph (1), two organizations are members of an affiliated group of organizations but only if—
(A) the governing instrument of one such organization requires it to be bound by decisions of the other organization on legislative issues, or
(B) the governing board of one such organization includes persons who—
(i) are specifically designated representatives of another such organization or are members of the governing board, officers, or paid executive staff members of such other organization, and
(ii) by aggregating their votes, have sufficient voting power to cause or prevent action on legislative issues by the first such organization.
(3) Different taxable years
If members of an affiliated group of organizations have different taxable years, their expenditures shall be computed for purposes of this section in a manner to be prescribed by regulations promulgated by the Secretary.
(4) Limited control
If two or more organizations are members of an affiliated group of organizations (as defined in paragraph (2) without regard to subparagraph (B) thereof), no two members of such affiliated group are affiliated (as defined in paragraph (2) without regard to subparagraph (A) thereof), and the governing instrument of no such organization requires it to be bound by decisions of any of the other such organizations on legislative issues other than as to action with respect to Acts, bills, resolutions, or similar items by the Congress, then—
(A) in the case of any organization whose decisions bind one or more members of such affiliated group, directly or indirectly, the determination as to whether such organization has paid or incurred excess lobbying expenditures and the determination as to whether such organization has exceeded the expenditure limits of section 501(h)(1) shall be made as though such organization has paid or incurred those amounts paid or incurred by such members of such affiliated group to influence legislation with respect to Acts, bills, resolutions, or similar items by the Congress, and
(B) in the case of any organization to which subparagraph (A) does not apply, but which is a member of such affiliated group, the determination as to whether such organization has paid or incurred excess lobbying expenditures and the determination as to whether such organization has exceeded the expenditure limits of section 501(h)(1) shall be made as though such organization is not a member of such affiliated group.
(Added
Editorial Notes
Amendments
1978—Subsec. (c)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1978 Amendment
Amendment by
§4912. Tax on disqualifying lobbying expenditures of certain organizations
(a) Tax on organization
If an organization to which this section applies is not described in section 501(c)(3) for any taxable year by reason of making lobbying expenditures, there is hereby imposed a tax on the lobbying expenditures of such organization for such taxable year equal to 5 percent of the amount of such expenditures. The tax imposed by this subsection shall be paid by the organization.
(b) On management
If tax is imposed under subsection (a) on the lobbying expenditures of any organization, there is hereby imposed on the agreement of any organization manager to the making of any such expenditures, knowing that such expenditures are likely to result in the organization not being described in section 501(c)(3), a tax equal to 5 percent of the amount of such expenditures, unless such agreement is not willful and is due to reasonable cause. The tax imposed by this subsection shall be paid by any manager who agreed to the making of the expenditures.
(c) Organizations to which section applies
(1) In general
Except as provided in paragraph (2), this section shall apply to any organization which was exempt (or was determined by the Secretary to be exempt) from taxation under section 501(a) by reason of being an organization described in section 501(c)(3).
(2) Exceptions
This section shall not apply to any organization—
(A) to which an election under section 501(h) applies,
(B) which is a disqualified organization (within the meaning of section 501(h)(5)), or
(C) which is a private foundation.
(d) Definitions
(1) Lobbying expenditures
The term "lobbying expenditure" means any amount paid or incurred by the organization in carrying on propaganda, or otherwise attempting to influence legislation.
(2) Organization manager
The term "organization manager" has the meaning given to such term by section 4955(f)(2).
(3) Joint and several liability
If more than 1 person is liable under subsection (b), all such persons shall be jointly and severally liable under such subsection.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
CHAPTER 42 —PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT ORGANIZATIONS
Editorial Notes
Amendments
2017—
2006—
1996—
1987—
1984—
1980—
1978—
1969—
1 Section numbers editorially supplied.
Subchapter A—Private Foundations
Editorial Notes
Amendments
1978—
1969—
§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) for the taxable year, with respect to the carrying on of its activities, a tax equal to 1.39 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 capital gain net income 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, payments with respect to securities loans (as defined in section 512(a)(5)), and royalties, but not including any such income to the extent included in computing the tax imposed by section 511. Such term shall also include income from sources similar to those in the preceding sentence.
(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 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 without regard to section 613 (relating to percentage depletion).
(4) Capital gains and losses
For purposes of paragraph (1) in determining capital gain net income—
(A) There shall not be taken into account any gain or loss from the sale or other disposition of property to the extent that such gain or loss is taken into account for purposes of computing the tax imposed by section 511.
(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 or carrybacks.
(D) Except to the extent provided by regulation, under rules similar to the rules of section 1031 (including the exception under subsection (a)(2) thereof), no gain or loss shall be taken into account with respect to any portion of property used for a period of not less than 1 year for a purpose or function constituting the basis of the private foundation's exemption if the entire property is exchanged immediately following such period solely for property of like kind which is to be used primarily for a purpose or function constituting the basis for such foundation's exemption.
(5) Tax-exempt income
For purposes of this section, net investment income shall be determined by applying section 103 (relating to State and local bonds) and section 265 (relating to expenses and interest relating to tax-exempt income).
(d) Exemption for certain operating foundations
(1) In general
No tax shall be imposed by this section on any private foundation which is an exempt operating foundation for the taxable year.
(2) Exempt operating foundation
For purposes of this subsection, the term "exempt operating foundation" means, with respect to any taxable year, any private foundation if—
(A) such foundation is an operating foundation (as defined in section 4942(j)(3)),
(B) such foundation has been publicly supported for at least 10 taxable years,
(C) at all times during the taxable year, the governing body of such foundation—
(i) consists of individuals at least 75 percent of whom are not disqualified individuals, and
(ii) is broadly representative of the general public, and
(D) at no time during the taxable year does such foundation have an officer who is a disqualified individual.
(3) Definitions
For purposes of this subsection—
(A) Publicly supported
A private foundation is publicly supported for a taxable year if it meets the requirements of section 170(b)(1)(A)(vi) or 509(a)(2) for such taxable year.
(B) Disqualified individual
The term "disqualified individual" means, with respect to any private foundation, an individual who is—
(i) a substantial contributor to the foundation,
(ii) 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, or
(iii) a member of the family of any individual described in clause (i) or (ii).
(C) Substantial contributor
The term "substantial contributor" means a person who is described in section 507(d)(2).
(D) Family
The term "family" has the meaning given to such term by section 4946(d).
(E) Constructive ownership
The rules of paragraphs (3) and (4) of section 4946(a) shall apply for purposes of subparagraph (B)(ii).
(Added
Editorial Notes
Codification
Section 1221(a)(1), (b) of
Amendments
2019—Subsec. (a).
Subsec. (e).
2007—Subsec. (c)(4)(A).
2006—Subsec. (c)(2).
Subsec. (c)(4)(A).
Subsec. (c)(4)(C).
Subsec. (c)(4)(D).
1986—Subsec. (c)(5).
Subsec. (e)(2).
"(B) the average percentage payout for the base period equals or exceeds 5 percent.
In the case of an operating foundation (as defined in section 4942(j)(3)), subparagraph (B) shall be applied by substituting '31/3 percent' for '5 percent'."
1984—Subsec. (d).
Subsec. (e).
1978—Subsec. (a).
Subsec. (c)(2).
1976—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2019 Amendment
Effective Date of 2007 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1301(j)(6) of
Amendment by section 1832 of
Effective Date of 1984 Amendment
Effective Date of 1978 Amendments
Amendment by
Effective Date
"(1)
"(2)
"(A) Sections 4940, 4942, 4943, and 4948 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this section), and
"(B) The amendments made by subsection (d) [enacting
"(3)
Savings Provision
"(1)
"(2)
"(A) any transaction between a private foundation and a corporation which is a disqualified person (as defined in section 4946), pursuant to the terms of securities of such corporation in existence at the time acquired by the foundation, if such securities were acquired by the foundation before May 27, 1969;
"(B) the sale, exchange, or other disposition of property which is owned by a private foundation on May 26, 1969 (or which is acquired by a private foundation 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), to a disqualified person, if such foundation is required to dispose of such property in order not to be liable for tax under section 4943 (relating to taxes on excess business holdings) applied, in the case of a disposition before January 1, 1977, without taking section 4943(c)(4) into account and it receives in return an amount which equals or exceeds the fair market value of such property at the time of such disposition or at the time a contract for such disposition was previously executed in a transaction which would not constitute a prohibited transaction (within the meaning of section 503(b) or the corresponding provisions of prior law);
"(C) the leasing of property or the lending of money or other extension of credit between a disqualified person and a private foundation pursuant to a binding contract in effect on October 9, 1969 (or pursuant to renewals of such a contract), until taxable years beginning after December 31, 1979, if such leasing or lending (or other extension of credit) remains at least as favorable as an arm's-length transaction with an unrelated party and if the execution of such contract was not at the time of such execution a prohibited transaction (within the meaning of section 503(b) or the corresponding provisions of prior law);
"(D) the use of goods, services, or facilities which are shared by a private foundation and a disqualified person until taxable years beginning after December 31, 1979, if such use is pursuant to an arrangement in effect before October 9, 1969, and such arrangement was not a prohibited transaction (within the meaning of section 503(b) or the corresponding provisions of prior law) at the time it was made and would not be a prohibited transaction if such section continued to apply;
"(E) the use of property in which a private foundation and a disqualified person have a joint or common interest, if the interests of both in such property were acquired before October 9, 1969; and
"(F) the sale, exchange, or other disposition (other than by lease) of property which is owned by a private foundation to a disqualified person if—
"(i) such foundation is leasing substantially all of such property under a lease to which subparagraph (C) applies,
"(ii) the disposition to such disqualified person occurs before January 1, 1978, and
"(iii) such foundation receives in return for the disposition to such disqualified person an amount which equals or exceeds the fair market value of such property at the time of the disposition or at the time (after June 30, 1976) a contract for the disposition was previously executed in a transaction which would not constitute a prohibited transaction (within the meaning of section 503(b) or any corresponding provision of prior law).
"(3)
"(A) for all purposes other than the determination of the minimum investment return under section 4942(j)(3)(B)(ii), for taxable years beginning before January 1, 1972, apply without regard to section 4942(e) (relating to minimum investment return), and for taxable years beginning in 1972, 1973, and 1974, apply with an applicable percentage (as prescribed in section 4942(e)(3)) which does not exceed 4½ percent, 5 percent, and 5½ percent, respectively;
"(B) not apply to an organization to the extent its income is required to be accumulated pursuant to the mandatory terms (as in effect on May 26, 1969, and at all times thereafter) of an instrument executed before May 27, 1969, with respect to the transfer of income producing property to such organization, except that section 4942 shall apply to such organization if the organization would have been denied exemption if section 504(a) had not been repealed by this Act, or would have had its deductions under section 642(c) limited if section 681(c) had not been repealed by this Act. In applying the preceding sentence, in addition to the limitations contained in section 504(a) or 681(c) before its repeal, section 504(a)(1) or 681(c)(1) shall be treated as not applying to an organization to the extent its income is required to be accumulated pursuant to the mandatory terms (as in effect on January 1, 1951, and at all times thereafter) of an instrument executed before January 1, 1951, with respect to the transfer of income producing property to such organization before such date, if such transfer was irrevocable on such date;
"(C) apply to a grant to a private foundation described in section 4942(g)(1)(A)(ii) which is not described in section 4942(g)(1)(A)(i), pursuant to a written commitment which was binding on May 26, 1969, and at all times thereafter, as if such grant is a grant to an operating foundation (as defined in section 4942(j)(3)), if such grant is made for one or more of the purposes described in section 170(c)(2)(B) and is to be paid out to such private foundation on or before December 31, 1974;
"(D) apply, for purposes of section 4942(f), in such a manner as to treat any distribution made to a private foundation in redemption of stock held by such private foundation in a business enterprise as not essentially equivalent to a dividend under section 302(b)(1) if such redemption is described in paragraph (2)(B) of this subsection;
"(E) not apply to an organization which is prohibited by its governing instrument or other instrument from distributing capital or corpus to the extent the requirements of section 4942 are inconsistent with such prohibition; and
"(F) apply, in the case of an organization described in paragraph (4)(A) of this subsection,
"(i) by applying section 4942(e) without regard to the stock to which paragraph (4)(A)(ii) of this subsection applies,
"(ii) by applying section 4942(f) without regard to dividend income for such stock, and
"(iii) by defining the distributable amount as the sum of the amount determined under section 4942(d) (after the application of clauses (i) and (ii)), and the amount of the dividend income from such stock.
With respect to taxable years beginning after December 31, 1971, subparagraphs (B) and (E) shall apply only 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 comply with the provisions of section 4942, and in the case of subparagraph (B) for all periods after the termination of such judicial proceeding during which the governing instrument or any other instrument does not permit compliance with such provisions.
"(4)
"(A) In the case of a private foundation—
"(i) which was incorporated before January 1, 1951;
"(ii) substantially all of the assets of which on May 26, 1969, consist of more than 90 percent of the stock of an incorporated business enterprise which is licensed and regulated, the sales or contracts of which are regulated, and the professional representatives of which are licensed, by State regulatory agencies in at least 10 States; and
"(iii) which acquired such stock solely by gift, devise, or bequest, section 4943(c)(4)(A)(i) shall be applied with respect to the holdings of such foundation in such incorporated business enterprise as if it did not contain the phrase ', but in no event shall the percentage so substituted be more than 50 percent', and section 4943(c)(4)(D) shall not apply with respect to such holdings. For purposes of the preceding sentence, stock of such enterprise in a trust created before May 27, 1969, of which the foundation is the remainder beneficiary shall be deemed to be held by such foundation on May 26, 1969, if such foundation held (without regard to such trust) more than 20 percent of the stock of such enterprise on May 26, 1969.
"(B) Subparagraph (A) shall apply to a private foundation only if—
"(i) the foundation does not purchase any stock or other interest in the enterprise described in subparagraph (A) after May 26, 1969, and does not acquire any stock or other interest in any other business enterprise which constitutes excess business holdings under section 4943; and
"(ii) in the last 5 taxable years ending on or before December 31, 1970, the foundation expends substantially all of its adjusted net income (as defined in section 4942(f)) for the purpose or function for which it is organized and operated.
"(C) For purposes of section 4943(c)(6), the term 'purchase' does not include an exchange which is described in paragraph (2)(B) of this subsection and which is pursuant to a plan for disposition of excess business holdings.
"(5)
"(6)
"(7)
"(8)
[
[
[
[
Determination of Operating Foundation Status for Certain Purposes
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Public Support Requirement Not Applicable to Certain Existing Foundations
§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 10 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 5 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 taxable 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) $20,000 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 $20,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $20,000.
(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 (determined without regard to section 7872) and if the proceeds of the loan are used exclusively for purposes specified in 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);
(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;
(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) (without regard to paragraph (3) thereof), if the recipients of such prizes and awards are selected from the general public,
(ii) scholarships and fellowship grants 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 are to be used for study at an educational organization described in section 170(b)(1)(A)(ii),
(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
(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
(H) the leasing by a disqualified person to a private foundation of office space for use by the foundation in a building with other tenants who are not disqualified persons shall not be treated as an act of self-dealing if—
(i) such leasing of office space is pursuant to a binding lease which was in effect on October 9, 1969, or pursuant to renewals of such a lease;
(ii) the execution of such lease was not a prohibited transaction (within the meaning of section 503(b) or any corresponding provision of prior law) at the time of such execution; and
(iii) the terms of the lease (or any renewal) reflect an arm's-length transaction.
(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 the earliest of—
(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212,
(B) the date on which the tax imposed by subsection (a)(1) is assessed, or
(C) 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 taxable 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.
(Added
Editorial Notes
References in Text
The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (d)(2)(G)(ii), is the date of enactment of
Codification
Section 1212(a)(1), (2) of
Amendments
2006—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (c)(2).
1988—Subsec. (d)(2)(G)(ii).
1986—Subsec. (d)(2)(B).
Subsec. (d)(2)(G)(i).
Subsec. (d)(2)(G)(vii).
1980—Subsec. (b)(1).
Subsec. (d)(2)(H).
Subsec. (e)(1)(B), (C).
Subsec. (e)(2)(B).
Subsec. (e)(4).
1976—Subsec. (d)(2)(G)(ii).
Subsec. (e)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendments
Amendment by section 122(a)(2)(A) of
Amendment by section 1812(b)(1) of
Amendment by
Effective Date of 1980 Amendment
For effective date of amendment by
Savings Provision
Exceptions to applicability of section, see section 101(l)(2) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Tax on Self-Dealing Not To Apply to Certain Stock Purchases
"(a)
"(1) consideration for such purchase equaled or exceeded the fair market value of such stock,
"(2) the purchaser of such stock did not make any contribution to such foundation at any time during the 5-year period ending on the date of such purchase,
"(3) the aggregate contributions to such foundation by the purchaser before such date were less than $10,000 and less than 2 percent of the total contributions received by the foundation as of such date, and
"(4) such purchase was pursuant to the settlement of litigation involving the purchaser.
"(b)
Applicability to Determination of Status as Substantial Contributor for Purposes of Taxes on Self-Dealing of Contributions Made Prior to October 9, 1969
Determination of status as substantial contributor within
§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 30 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)(2)),
(C) the foundation notifies the Secretary 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 taxable 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 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 term "distributable amount" means, with respect to any foundation for any taxable year, an amount equal to—
(1) the sum of the minimum investment return plus the amounts described in subsection (f)(2)(C), reduced by
(2) the sum of the taxes imposed on such private foundation for the taxable year under subtitle A and section 4940.
(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 5 percent of the excess of—
(A) the aggregate fair market value of all assets of the foundation other than those which are used (or held for use) directly in carrying out the foundation's exempt purpose, over
(B) the acquisition indebtedness with respect to such assets (determined under section 514(c)(1) without regard to the taxable year in which the indebtedness was incurred).
(2) Valuation
(A) In general
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 shall by regulations prescribe.
(B) Reductions in value for blockage or similar factors
In determining the value of any securities under this paragraph, the fair market value of such securities (determined without regard to any reduction in value) shall not be reduced unless, and only to the extent that, the private foundation establishes that as a result of—
(i) the size of the block of such securities,
(ii) the fact that the securities held are securities in a closely held corporation, or
(iii) the fact that the sale of such securities would result in a forced or distress sale,
the securities could not be liquidated within a reasonable period of time except at a price less than such fair market value. Any reduction in value allowable under this subparagraph shall not exceed 10 percent of such fair market value.
(f) Adjusted net income
(1) Defined
For purposes of subsection (j), 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 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 State and local bonds) 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;
(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; and
(D) section 483 (relating to imputed interest) shall not apply in the case of a binding contract made in a taxable year beginning before January 1, 1970.
(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 that portion of reasonable and necessary administrative expenses) paid to accomplish one or more purposes described in section 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).
(2) Certain set-asides
(A) In general
Subject to such terms and conditions as may be prescribed by the Secretary, 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 if it meets the requirements of subparagraph (B).
(B) Requirements
An amount set aside for a specific project shall meet the requirements of this subparagraph if at the time of the set-aside the foundation establishes to the satisfaction of the Secretary that the amount will be paid for the specific project within 5 years, and either—
(i) at the time of the set-aside the private foundation establishes to the satisfaction of the Secretary that the project is one which can better be accomplished by such set-aside than by immediate payment of funds, or
(ii)(I) the project will not be completed before the end of the taxable year of the foundation in which the set-aside is made,
(II) the private foundation in each taxable year beginning after December 31, 1975 (or after the end of the fourth taxable year following the year of its creation, whichever is later), distributes amounts, in cash or its equivalent, equal to not less than the distributable amount determined under subsection (d) (without regard to subsection (i)) for purposes described in section 170(c)(2)(B) (including but not limited to payments with respect to set-asides which were treated as qualifying distributions in one or more prior years), and
(III) the private foundation has distributed (including but not limited to payments with respect to set-asides which were treated as qualifying distributions in one or more prior years) during the four taxable years immediately preceding its first taxable year beginning after December 31, 1975, or the fifth taxable year following the year of its creation, whichever is later, an aggregate amount, in cash or its equivalent, of not less than the sum of the following: 80 percent of the first preceding taxable year's distributable amount; 60 percent of the second preceding taxable year's distributable amount; 40 percent of the third preceding taxable year's distributable amount; and 20 percent of the fourth preceding taxable year's distributable amount.
(C) Certain failures to distribute
If, for any taxable year to which clause (ii)(II) of subparagraph (B) applies, the private foundation fails to distribute in cash or its equivalent amounts not less than those required by such clause and—
(i) the failure to distribute such amounts was not willful and was due to reasonable cause, and
(ii) the foundation distributes an amount in cash or its equivalent which is not less than the difference between the amounts required to be distributed under clause (ii)(II) of subparagraph (B) and the amounts actually distributed in cash or its equivalent during that taxable year within the correction period (as defined in section 4963(e)),
such distribution in cash or its equivalent shall be treated for the purposes of this subparagraph as made during such year.
(D) Reduction in distribution amount
If, during the taxable years in the adjustment period for which the organization is a private foundation, the foundation distributes amounts in cash or its equivalent which exceed the amount required to be distributed under clause (ii)(II) of subparagraph (B) (including but not limited to payments with respect to set-asides which were treated as qualifying distributions in prior years), then for purposes of this subsection the distribution required under clause (ii)(II) of subparagraph (B) for the taxable year shall be reduced by an amount equal to such excess.
(E) Adjustment period
For purposes of subparagraph (D), 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, 1975, and immediately preceding the taxable year.
In the case of a set-aside which satisfies the requirements of clause (i) of subparagraph (B), for good cause shown, the period for paying the amount set aside may be extended by the Secretary.
(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 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.
(4) Limitation on distributions by nonoperating private foundations to supporting organizations
(A) In general
For purposes of this section, the term "qualifying distribution" shall not include any amount paid by a private foundation which is not an operating foundation to—
(i) any type III supporting organization (as defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as defined in section 4943(f)(5)(B)), and
(ii) any organization which is described in subparagraph (B) or (C) if—
(I) a disqualified person of the private foundation directly or indirectly controls such organization or a supported organization (as defined in section 509(f)(3)) of such organization, or
(II) the Secretary determines by regulations that a distribution to such organization otherwise is inappropriate.
(B) Type I and type II supporting organizations
An organization is described in this subparagraph if the organization meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and is—
(i) operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2) of section 509(a), or
(ii) supervised or controlled in connection with one or more such organizations.
(C) Functionally integrated type III supporting organizations
An organization is described in this subparagraph if the organization is a functionally integrated type III supporting organization (as defined under section 4943(f)(5)(B)).
(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 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 foundation or section 170(b)(1)(F)(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) 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 earlier of—
(A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212, or
(B) the date on which the tax imposed by subsection (a) is assessed.
(2) Allowable distribution period
The term "allowable 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 by—
(A) any period in which a deficiency cannot be assessed under section 6213(a), and
(B) any other period which the Secretary 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 the lesser of—
(i) its adjusted net income (as defined in subsection (f)), or
(ii) its minimum investment return; 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 (4)), 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 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.
Notwithstanding the provisions of subparagraph (A), if the qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) of an organization for the taxable year exceed the minimum investment return for the taxable year, clause (ii) of subparagraph (A) shall not apply unless substantially all of such qualifying distributions are made directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated.
(4) Functionally related business
The term "functionally related business" means—
(A) a trade or business which is not an unrelated trade or business (as defined in section 513), or
(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.
(5) Certain elderly care facilities
For purposes of this section (but no other provisions of this title), the term "operating foundation" includes any organization which, on May 26, 1969, and at all times thereafter before the close of the taxable year, operated and maintained as its principal functional purpose facilities for the long-term care, comfort, maintenance, or education of permanently and totally disabled persons, elderly persons, needy widows, or children but only if such organization meets the requirements of paragraph (3)(B)(ii).
(Added
Editorial Notes
Codification
Sections 1212(b) and 1244(a) of
Amendments
2014—Subsec. (g)(2)(A).
Subsec. (i)(2).
2007—Subsec. (i)(1)(A).
2006—Subsec. (a).
Subsec. (g)(4).
1986—Subsec. (f)(2)(A).
1984—Subsec. (a)(2)(B).
Subsec. (d)(1).
Subsec. (f)(1).
Subsec. (g)(1)(A).
Subsec. (g)(2)(C)(ii).
Subsec. (g)(4).
1983—Subsec. (j)(3)(A)(i).
1981—Subsec. (d)(1).
Subsec. (j)(3).
1980—Subsec. (b).
Subsec. (g)(2)(C)(ii).
Subsec. (j)(1).
Subsec. (j)(2).
Subsec. (j)(3)(B)(i).
Subsec. (j)(4) to (6).
1978—Subsec. (j)(6).
1976—Subsec. (a)(2)(C).
Subsec. (e).
Subsec. (f)(2)(D).
Subsec. (g)(2).
Subsecs. (h)(2), (j)(2)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 1212(b) of
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 305(b)(4) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Effective Date of 1980 Amendment
For effective date of amendment by
Effective Date of 1978 Amendment
Effective Date of 1976 Amendment
Savings Provision
Applicability of section to organizations organized before May 27, 1969, see section 101(l)(3) of
§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 10 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 taxable 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—
(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 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. 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 the preceding sentence, any decrease in percentage holdings attributable to issuances of stock (or to issuances of stock coupled with redemptions of stock) shall be disregarded so long as—
(I) the net percentage decrease disregarded under this sentence does not exceed 2 percent, and
(II) the number of shares held by the foundation is not affected by any such issuance or redemption.
(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.
(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 and all disqualified persons have 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 4946(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 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).
In any case where an acquisition by a disqualified person would result in a substitution under clause (i) or (ii) of subparagraph (D) of paragraph (4), the preceding sentence shall be applied with respect to such acquisition as if it did not contain the phrase "or by a disqualified person" in the material preceding subparagraph (A).
(7) 5-year extension of period to dispose of certain large gifts and bequests
The Secretary may extend for an additional 5-year period the period under paragraph (6) for disposing of excess business holdings in the case of an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures if—
(A) the foundation establishes that—
(i) diligent efforts to dispose of such holdings have been made within the initial 5-year period, and
(ii) disposition within the initial 5-year period has not been possible (except at a price substantially below fair market value) by reason of such size and complexity or diversity of such holdings,
(B) before the close of the initial 5-year period—
(i) the private foundation submits to the Secretary a plan for disposing of all of the excess business holdings involved in the extension, and
(ii) the private foundation submits the plan described in clause (i) to the Attorney General (or other appropriate State official) having administrative or supervisory authority or responsibility with respect to the foundation's disposition of the excess business holdings involved and submits to the Secretary any response received by the private foundation from the Attorney General (or other appropriate State official) to such plan during such 5-year period, and
(C) the Secretary determines that such plan can reasonably be expected to be carried out before the close of the extension period.
(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 excess holdings and ending on the earlier of—
(A) 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, or
(B) the date on which the tax imposed by subsection (a) in respect of such holdings is assessed.
(3) Business enterprise
The term "business enterprise" does not include—
(A) a functionally related business (as defined in section 4942(j)(4)), 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 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.
(4) Disqualified person
The term "disqualified person" (as defined in section 4946(a)) does not include a plan described in section 4975(e)(7) with respect to the holdings of a private foundation described in paragraphs (4) and (5) of subsection (c).
(e) Application of tax to donor advised funds
(1) In general
For purposes of this section, a donor advised fund (as defined in section 4966(d)(2)) shall be treated as a private foundation.
(2) Disqualified person
In applying this section to any donor advised fund (as so defined), the term "disqualified person" means, with respect to the donor advised fund, any person who is—
(A) described in section 4966(d)(2)(A)(iii),
(B) a member of the family of an individual described in subparagraph (A), or
(C) a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting "persons described in subparagraph (A) or (B) of section 4943(e)(2)" for "persons described in subparagraph (A) or (B) of paragraph (1)" in subparagraph (A)(i) thereof).
(3) Present holdings
For purposes of this subsection, rules similar to the rules of paragraphs (4), (5), and (6) of subsection (c) shall apply to donor advised funds (as so defined), except that—
(A) "the date of the enactment of this subsection" shall be substituted for "May 26, 1969" each place it appears in paragraphs (4), (5), and (6), and
(B) "January 1, 2007" shall be substituted for "January 1, 1971" in paragraph (4)(E).
(f) Application of tax to supporting organizations
(1) In general
For purposes of this section, an organization which is described in paragraph (3) shall be treated as a private foundation.
(2) Exception
The Secretary may exempt the excess business holdings of any organization from the application of this subsection if the Secretary determines that such holdings are consistent with the purpose or function constituting the basis for its exemption under section 501.
(3) Organizations described
An organization is described in this paragraph if such organization is—
(A) a type III supporting organization (other than a functionally integrated type III supporting organization), or
(B) an organization which meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and which is supervised or controlled in connection with one or more organizations described in paragraph (1) or (2) of section 509(a), but only if such organization accepts any gift or contribution from any person described in section 509(f)(2)(B).
(4) Disqualified person
(A) In general
In applying this section to any organization described in paragraph (3), the term "disqualified person" means, with respect to the organization—
(i) any person who was, at any time during the 5-year period ending on the date described in subsection (a)(2)(A), in a position to exercise substantial influence over the affairs of the organization,
(ii) any member of the family (determined under section 4958(f)(4)) of an individual described in clause (i),
(iii) any 35-percent controlled entity (as defined in section 4958(f)(3) by substituting "persons described in clause (i) or (ii) of section 4943(f)(4)(A)" for "persons described in subparagraph (A) or (B) of paragraph (1)" in subparagraph (A)(i) thereof),
(iv) any person described in section 4958(c)(3)(B), and
(v) any organization—
(I) which is effectively controlled (directly or indirectly) by the same person or persons who control the organization 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 (B) or a member of the family (within the meaning of section 4946(d)) of such a person.
(B) Persons described
A person is described in this subparagraph if such person is—
(i) a substantial contributor to the organization (as defined in section 4958(c)(3)(C)),
(ii) an officer, director, or trustee of the organization (or an individual having powers or responsibilities similar to those of the officers, directors, or trustees of the organization), or
(iii) 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 (as so defined) to the organization.
(5) Type III supporting organization; functionally integrated type III supporting organization
For purposes of this subsection—
(A) Type III supporting organization
The term "type III supporting organization" means an organization which meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and which is operated in connection with one or more organizations described in paragraph (1) or (2) of section 509(a).
(B) Functionally integrated type III supporting organization
The term "functionally integrated type III supporting organization" means a type III supporting organization which is not required under regulations established by the Secretary to make payments to supported organizations (as defined under section 509(f)(3)) due to the activities of the organization related to performing the functions of, or carrying out the purposes of, such supported organizations.
(6) Special rule for certain holdings of type III supporting organizations
For purposes of this subsection, the term "excess business holdings" shall not include any holdings of a type III supporting organization in any business enterprise if, as of November 18, 2005, the holdings were held (and at all times thereafter, are held) for the benefit of the community pursuant to the direction of a State attorney general or a State official with jurisdiction over such organization.
(7) Present holdings
For purposes of this subsection, rules similar to the rules of paragraphs (4), (5), and (6) of subsection (c) shall apply to organizations described in section 509(a)(3), except that—
(A) "the date of the enactment of this subsection" shall be substituted for "May 26, 1969" each place it appears in paragraphs (4), (5), and (6), and
(B) "January 1, 2007" shall be substituted for "January 1, 1971" in paragraph (4)(E).
(g) Exception for certain holdings limited to independently-operated philanthropic business
(1) In general
Subsection (a) shall not apply with respect to the holdings of a private foundation in any business enterprise which meets the requirements of paragraphs (2), (3), and (4) for the taxable year.
(2) Ownership
The requirements of this paragraph are met if—
(A) 100 percent of the voting stock in the business enterprise is held by the private foundation at all times during the taxable year, and
(B) all the private foundation's ownership interests in the business enterprise were acquired by means other than by purchase.
(3) All profits to charity
(A) In general
The requirements of this paragraph are met if the business enterprise, not later than 120 days after the close of the taxable year, distributes an amount equal to its net operating income for such taxable year to the private foundation.
(B) Net operating income
For purposes of this paragraph, the net operating income of any business enterprise for any taxable year is an amount equal to the gross income of the business enterprise for the taxable year, reduced by the sum of—
(i) the deductions allowed by
(ii) the tax imposed by
(iii) an amount for a reasonable reserve for working capital and other business needs of the business enterprise.
(4) Independent operation
The requirements of this paragraph are met if, at all times during the taxable year—
(A) no substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation or family member (as determined under section 4958(f)(4)) of such a contributor is a director, officer, trustee, manager, employee, or contractor of the business enterprise (or an individual having powers or responsibilities similar to any of the foregoing),
(B) at least a majority of the board of directors of the private foundation are persons who are not—
(i) directors or officers of the business enterprise, or
(ii) family members (as so determined) of a substantial contributor (as so defined) to the private foundation, and
(C) there is no loan outstanding from the business enterprise to a substantial contributor (as so defined) to the private foundation or to any family member of such a contributor (as so determined).
(5) Certain deemed private foundations excluded
This subsection shall not apply to—
(A) any fund or organization treated as a private foundation for purposes of this section by reason of subsection (e) or (f),
(B) any trust described in section 4947(a)(1) (relating to charitable trusts), and
(C) any trust described in section 4947(a)(2) (relating to split-interest trusts).
(Added
Editorial Notes
References in Text
The date of enactment of this subsection, referred to in subsecs. (e)(3)(A) and (f)(7)(A), probably means the date of enactment of subsecs. (e) and (f) which were enacted by
Codification
Sections 1212(c), 1233(a), and 1243(a) of
Amendments
2018—Subsec. (g).
2014—Subsecs. (e)(3)(B), (f)(7)(B).
2006—Subsec. (a)(1).
Subsec. (e).
Subsec. (f).
1984—Subsec. (c)(4)(A)(ii).
Subsec. (c)(4)(B)(i).
Subsec. (c)(6).
Subsec. (c)(7).
Subsec. (d)(4).
1980—Subsec. (b).
Subsec. (d)(2).
Subsec. (d)(3), (4).
1976—Subsecs. (c), (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Effective Date of 2006 Amendment
Amendment by section 1212(c) of
Effective Date of 1984 Amendment
"(1)
"(2)
Effective Date of 1980 Amendment
For effective date of amendment by
Savings Provision
Applicability of section to private foundations, see section 101(l)(4) of
§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 10 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 10 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 taxable 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)(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 $10,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $20,000.
(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 the earliest of—
(A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212,
(B) the date on which the tax imposed by subsection (a)(1) is assessed, or
(C) 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.
(Added
Editorial Notes
Codification
Section 1212(d) of
Amendments
2006—Subsec. (a).
Subsec. (d)(2).
1980—Subsec. (b)(1).
Subsec. (e)(1)(B), (C).
Subsec. (e)(3).
1976—Subsec. (e)(3)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1980 Amendment
For effective date of amendment by
§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 20 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 5 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 taxable 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 $10,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $20,000.
(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 unless—
(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
(B) 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).
(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 income as defined in section 509(e)) of which is received from exempt organizations, the general public, governmental 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. 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, if it is demonstrated to the satisfaction of the Secretary that—
(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),
(2) the grant constitutes a prize or award which is subject to the provisions of section 74(b) (without regard to paragraph (3) thereof), 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.
(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 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) 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.
(Added
Editorial Notes
References in Text
The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (g)(1), is the date of enactment of
Codification
Sections 1212(e) and 1244(b) of
Amendments
2014—Subsec. (f).
2006—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (c)(2).
Subsec. (d)(4)(A).
1988—Subsec. (g)(1).
1986—Subsec. (g)(2).
1984—Subsec. (d)(4).
1980—Subsec. (b)(1).
Subsec. (i)(2).
1976—Subsec. (g).
Subsecs. (h), (i).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 1212(e) of
Amendment by section 1244(b) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Effective Date of 1980 Amendment
For effective date of amendment by
Savings Provision
Applicability of subsecs. (d)(4) and (h) of this section to grants to private foundations described in section 101(l)(C)(3) of
§4946. Definitions and special rules
(a) Disqualified person
(1) In general
For purposes of this subchapter, 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 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 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 subchapter, 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
(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 basic pay for the Senior Executive Service under
(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 $20,000 or more,
(6) a position as personal or executive assistant or secretary to any of the foregoing, or
(7) a member of the Internal Revenue Service Oversight Board.
(d) Members of family
For purposes of subsection (a)(1), the family of any individual shall include only his spouse, ancestors, children, grandchildren, great grandchildren, and the spouses of children, grandchildren, and great grandchildren.
(Added
Editorial Notes
Amendments
2000—Subsec. (c)(3)(B).
1998—Subsec. (c)(7).
1986—Subsec. (c)(5).
1984—Subsec. (d).
1978—Subsecs. (a)(1), (b).
Statutory Notes and Related Subsidiaries
Effective Date of 1986 Amendment
Effective Date of 1984 Amendment
Effective Date of 1978 Amendment
Amendment by
§4947. Application of taxes to certain nonexempt trusts
(a) Application of tax
(1) Charitable trusts
For purposes of part II of subchapter F of
(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), 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), 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 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 segregated within the meaning of subsection (a)(2)(B) of this section, the value of the net assets for purposes of subsections (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 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), 642(c), 2055, 2106(a)(2), 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), 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.
(4) Section 507
The provisions of section 507(a) shall not apply to a trust which is described in subsection (a)(2) by reason of a distribution of qualified employer securities (as defined in section 664(g)(4)) to an employee stock ownership plan (as defined in section 4975(e)(7)) in a qualified gratuitous transfer (as defined by section 664(g)).
(Added
Editorial Notes
Amendments
2010—Subsec. (a)(2)(A).
2004—Subsecs. (a)(1), (2), (b)(3).
2001—Subsec. (a)(2)(A).
1997—Subsec. (b)(4).
1976—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
§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 (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 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 of 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, 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 paragraph (1) for all taxable years beginning with the taxable year during which it is notified by the Secretary that it has engaged in a prohibited transaction. The Secretary 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, 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 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, 545(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 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).
(Added
Editorial Notes
Amendments
2004—Subsec. (c)(4).
1976—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Amendment by
Subchapter B—Black Lung Benefit Trusts
§4951. 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 trust described in section 501(c)(21). The rate of tax shall be equal to 10 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 trustee acting only as a trustee of the trust) who participates in the act of self-dealing.
(2) On trustee
In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any trustee of such a trust in an act of self-dealing between a disqualified person and the trust, 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 such trustee 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 trust described in section 501(c)(21) and in which the act is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this paragraph shall be paid by any disqualified person (other than a trustee acting only as a trustee of such a trust) who participated in the act of self-dealing.
(2) On trustee
In any case in which an additional tax is imposed by paragraph (1), if a trustee of such a trust 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 such trustee who refused to agree to part or all of the correction.
(c) 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.
(d) Self-dealing
(1) In general
For purposes of this section, the term "self-dealing" means any direct or indirect—
(A) sale, exchange, or leasing of real or personal property between a trust described in section 501(c)(21) and a disqualified person;
(B) lending of money or other extension of credit between such a trust and a disqualified person;
(C) furnishing of goods, services, or facilities between such a trust and a disqualified person;
(D) payment of compensation (or payment or reimbursement of expenses) by such a trust to a disqualified person; and
(E) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of such a trust.
(2) Special rules
For purposes of paragraph (1)—
(A) the transfer of personal property by a disqualified person to such a trust shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien;
(B) the furnishing of goods, services, or facilities by a disqualified person to such a trust 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 the purposes specified in section 501(c)(21)(A); and
(C) the payment of compensation (and the payment or reimbursement of expenses) by such a trust to a disqualified person for personal services which are reasonable and necessary to carrying out the exempt purpose of the trust shall not be an act of self-dealing if the compensation (or payment or reimbursement) is not excessive.
(e) 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 the earliest of—
(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212,
(B) the date on which the tax imposed by subsection (a)(1) is assessed, or
(C) 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)(C), 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 taxes imposed by subsection (b), shall be the highest fair market value during the taxable 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 trust 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) Disqualified person
The term "disqualified person" means, with respect to a trust described in section 501(c)(21), a person who is—
(A) a contributor to the trust,
(B) a trustee of the trust,
(C) an owner of more than 10 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 contributor to the trust,
(D) an officer, director, or employee of a person who is a contributor to the trust,
(E) the spouse, ancestor, lineal descendant, or spouse of a lineal descendant of an individual described in subparagraph (A), (B), (C), or (D),
(F) a corporation of which persons described in subparagraph (A), (B), (C), (D), or (E) own more than 35 percent of the total combined voting power,
(G) a partnership in which persons described in subparagraph (A), (B), (C), (D), or (E), own more than 35 percent of the profits interest, or
(H) a trust or estate in which persons described in subparagraph (A), (B), (C), (D), or (E), hold more than 35 percent of the beneficial interest.
For purposes of subparagraphs (C)(i) and (F), there shall be taken into account indirect stockholdings 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 only those individuals described in subparagraph (E) of this paragraph. For purposes of subparagraphs (C) (ii) and (iii), (G), and (H), 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 only those individuals described in subparagraph (E) of this paragraph.
(f) Payments of benefits
For purposes of this section, a payment, out of assets or income of a trust described in section 501(c)(21), for the purposes described in subclause (I) or (IV) of section 501(c)(21)(A)(i) shall not be considered an act of self-dealing.
(Added
Editorial Notes
Amendments
1992—Subsec. (f).
1980—Subsec. (b)(1).
Subsec. (e)(1)(B), (C).
Subsec. (e)(2)(B).
Subsec. (e)(4), (5).
Statutory Notes and Related Subsidiaries
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1980 Amendment
For effective date of amendment by
Effective Date
Subchapter effective with respect to contributions, acts, and expenditures made after Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of
§4952. Taxes on taxable expenditures
(a) Tax imposed
(1) On the fund
There is hereby imposed on each taxable expenditure (as defined in subsection (d)) from the assets or income of a trust described in section 501(c)(21) a tax equal to 10 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the trustee out of the assets of the trust.
(2) On the trustee
There is hereby imposed on the agreement of any trustee of such a trust 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 the trustee who agreed to the making of the expenditure.
(b) Additional taxes
(1) On the fund
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 taxable 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 trustee out of the assets of the trust.
(2) On the trustee
In any case in which an additional tax is imposed by paragraph (1), if a trustee refused to agree to a 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 trustee who refused to agree to part or all of the correction.
(c) Joint and several liability
For purposes of subsections (a) and (b), 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.
(d) Taxable expenditure
For purposes of this section, the term "taxable expenditure" means any amount paid or incurred by a trust described in section 501(c)(21) other than for a purpose specified in such section.
(e) Definitions
(1) Correction
The terms "correction" and "correct" mean, with respect to any taxable expenditure, recovering part or all of the expenditure to the extent recovery is possible, and where full recovery is not possible, contributions by the person or persons whose liabilities for black lung benefit claims (as defined in section 192(e)) are to be paid out of the trust to the extent necessary to place the trust in a financial position not worse than that in which it would be if the taxable expenditure had not been made.
(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.
(Added
Editorial Notes
Amendments
1980—Subsec. (b)(1).
Subsec. (e)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1980 Amendment
For effective date of amendment by
§4953. Tax on excess contributions to black lung benefit trusts
(a) Tax imposed
There is hereby imposed for each taxable year a tax in an amount equal to 5 percent of the amount of the excess contributions made by a person to or under a trust or trusts described in section 501(c)(21). The tax imposed by this subsection shall be paid by the person making the excess contribution.
(b) Excess contribution
For purposes of this section, the term "excess contribution" means the sum of—
(1) the amount by which the amount contributed for the taxable year to a trust or trusts described in section 501(c)(21) exceeds the amount of the deduction allowable to such person for such contributions for the taxable year under section 192, and
(2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(A) the excess of the maximum amount allowable as a deduction under section 192 for the taxable year over the amount contributed to the trust or trusts for the taxable year, and
(B) amounts distributed from the trust to the contributor which were excess contributions for the preceding taxable year.
(c) Treatment of withdrawal of excess contributions
Amounts distributed during the taxable year from a trust described in section 501(c)(21) to the contributor thereof the sum of which does not exceed the amount of the excess contribution made by the contributor shall not be treated as—
(1) an act of self-dealing (within the meaning of section 4951),
(2) a taxable expenditure (within the meaning of section 4952), or
(3) an act contrary to the purposes for which the trust is exempt from taxation under section 501(a).
(Added
Subchapter C—Political Expenditures of Section 501(c)(3) Organizations
Editorial Notes
Prior Provisions
A prior subchapter C, consisting of
§4955. Taxes on political expenditures of section 501(c)(3) organizations
(a) Initial taxes
(1) On the organization
There is hereby imposed on each political expenditure by a section 501(c)(3) organization a tax equal to 10 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the organization.
(2) On the management
There is hereby imposed on the agreement of any organization manager to the making of any expenditure, knowing that it is a political 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 organization manager who agreed to the making of the expenditure.
(b) Additional taxes
(1) On the organization
In any case in which an initial tax is imposed by subsection (a)(1) on a political expenditure and such expenditure is not corrected within the taxable 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 organization.
(2) On the management
In any case in which an additional tax is imposed by paragraph (1), if an organization 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 political expenditure. The tax imposed by this paragraph shall be paid by any organization 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 1 person is liable under subsection (a)(2) or (b)(2) with respect to the making of a political expenditure, all such persons shall be jointly and severally liable under such subsection with respect to such expenditure.
(2) Limit for management
With respect to any 1 political 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) Political expenditure
For purposes of this section—
(1) In general
The term "political expenditure" means any amount paid or incurred by a section 501(c)(3) organization in any participation in, or intervention in (including the publication or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
(2) Certain other expenditures included
In the case of an organization which is formed primarily for purposes of promoting the candidacy (or prospective candidacy) of an individual for public office (or which is effectively controlled by a candidate or prospective candidate and which is availed of primarily for such purposes), the term "political expenditure" includes any of the following amounts paid or incurred by the organization:
(A) Amounts paid or incurred to such individual for speeches or other services.
(B) Travel expenses of such individual.
(C) Expenses of conducting polls, surveys, or other studies, or preparing papers or other materials, for use by such individual.
(D) Expenses of advertising, publicity, and fundraising for such individual.
(E) Any other expense which has the primary effect of promoting public recognition, or otherwise primarily accruing to the benefit, of such individual.
(e) Coordination with sections 4945 and 4958
If tax is imposed under this section with respect to any political expenditure, such expenditure shall not be treated as a taxable expenditure for purposes of section 4945 or an excess benefit for purposes of section 4958.
(f) Other definitions
For purposes of this section—
(1) Section 501(c)(3) organization
The term "section 501(c)(3) organization" means any organization which (without regard to any political expenditure) would be described in section 501(c)(3) and exempt from taxation under section 501(a).
(2) Organization manager
The term "organization manager" means—
(A) any officer, director, or trustee of the organization (or individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization), and
(B) with respect to any expenditure, any employee of the organization having authority or responsibility with respect to such expenditure.
(3) Correction
The terms "correction" and "correct" mean, with respect to any political expenditure, recovering part or all of the expenditure to the extent recovery is possible, establishment of safeguards to prevent future political expenditures, and where full recovery is not possible, such additional corrective action as is prescribed by the Secretary by regulations.
(4) Taxable period
The term "taxable period" means, with respect to any political expenditure, the period beginning with the date on which the political expenditure occurs and ending on the earlier of—
(A) the date of mailing a notice of deficiency under section 6212 with respect to the tax imposed by subsection (a)(1), or
(B) the date on which tax imposed by subsection (a)(1) is assessed.
(Added
Editorial Notes
Amendments
1996—Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 1996 Amendment
"(1)
"(2)
Effective Date
Subchapter D—Failure by Certain Charitable Organizations To Meet Certain Qualification Requirements
Editorial Notes
Prior Provisions
A prior subchapter D, consisting of
Amendments
2017—
2010—
§4958. Taxes on excess benefit transactions
(a) Initial taxes
(1) On the disqualified person
There is hereby imposed on each excess benefit transaction a tax equal to 25 percent of the excess benefit. The tax imposed by this paragraph shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction.
(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 organization manager in the excess benefit transaction, knowing that it is such a transaction, a tax equal to 10 percent of the excess benefit, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any organization manager who participated in the excess benefit transaction.
(b) Additional tax on the disqualified person
In any case in which an initial tax is imposed by subsection (a)(1) on an excess benefit transaction and the excess benefit involved in such transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 200 percent of the excess benefit involved. The tax imposed by this subsection shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction.
(c) Excess benefit transaction; excess benefit
For purposes of this section—
(1) Excess benefit transaction
(A) In general
The term "excess benefit transaction" means any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for the performance of services unless such organization clearly indicated its intent to so treat such benefit.
(B) Excess benefit
The term "excess benefit" means the excess referred to in subparagraph (A).
(2) Special rules for donor advised funds
In the case of any donor advised fund (as defined in section 4966(d)(2))—
(A) the term "excess benefit transaction" includes any grant, loan, compensation, or other similar payment from such fund to a person described in subsection (f)(7) with respect to such fund, and
(B) the term "excess benefit" includes, with respect to any transaction described in subparagraph (A), the amount of any such grant, loan, compensation, or other similar payment.
(3) Special rules for supporting organizations
(A) In general
In the case of any organization described in section 509(a)(3)—
(i) the term "excess benefit transaction" includes—
(I) any grant, loan, compensation, or other similar payment provided by such organization to a person described in subparagraph (B), and
(II) any loan provided by such organization to a disqualified person (other than an organization described in subparagraph (C)(ii)), and
(ii) the term "excess benefit" includes, with respect to any transaction described in clause (i), the amount of any such grant, loan, compensation, or other similar payment.
(B) Person described
A person is described in this subparagraph if such person is—
(i) a substantial contributor to such organization,
(ii) a member of the family (determined under section 4958(f)(4)) of an individual described in clause (i), or
(iii) a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting "persons described in clause (i) or (ii) of section 4958(c)(3)(B)" for "persons described in subparagraph (A) or (B) of paragraph (1)" in subparagraph (A)(i) thereof).
(C) Substantial contributor
For purposes of this paragraph—
(i) In general
The term "substantial contributor" means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such person. In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs (B) and (C) of section 507(d)(2) shall apply for purposes of this subparagraph.
(ii) Exception
Such term shall not include—
(I) any organization described in paragraph (1), (2), or (4) of section 509(a), and
(II) any organization which is treated as described in such paragraph (2) by reason of the last sentence of section 509(a) and which is a supported organization (as defined in section 509(f)(3)) of the organization to which subparagraph (A) applies.
(4) Authority to include certain other private inurement
To the extent provided in regulations prescribed by the Secretary, the term "excess benefit transaction" includes any transaction in which the amount of any economic benefit provided to or for the use of a disqualified person is determined in whole or in part by the revenues of 1 or more activities of the organization but only if such transaction results in inurement not permitted under paragraph (3) or (4) of section 501(c), as the case may be. In the case of any such transaction, the excess benefit shall be the amount of the inurement not so permitted.
(d) Special rules
For purposes of this section—
(1) Joint and several liability
If more than 1 person is liable for any tax imposed by subsection (a) or subsection (b), all such persons shall be jointly and severally liable for such tax.
(2) Limit for management
With respect to any 1 excess benefit transaction, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $20,000.
(e) Applicable tax-exempt organization
For purposes of this subchapter, the term "applicable tax-exempt organization" means—
(1) any organization which (without regard to any excess benefit) would be described in paragraph (3), (4), or (29) of section 501(c) and exempt from tax under section 501(a), and
(2) any organization which was described in paragraph (1) at any time during the 5-year period ending on the date of the transaction.
Such term shall not include a private foundation (as defined in section 509(a)).
(f) Other definitions
For purposes of this section—
(1) Disqualified person
The term "disqualified person" means, with respect to any transaction—
(A) any person who was, at any time during the 5-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization,
(B) a member of the family of an individual described in subparagraph (A),
(C) a 35-percent controlled entity,
(D) any person who is described in subparagraph (A), (B), or (C) with respect to an organization described in section 509(a)(3) and organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the applicable tax-exempt organization,
(E) which involves a donor advised fund (as defined in section 4966(d)(2)), any person who is described in paragraph (7) with respect to such donor advised fund (as so defined), and
(F) which involves a sponsoring organization (as defined in section 4966(d)(1)), any person who is described in paragraph (8) with respect to such sponsoring organization (as so defined).
(2) Organization manager
The term "organization manager" means, with respect to any applicable tax-exempt organization, any officer, director, or trustee of such organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization).
(3) 35-percent controlled entity
(A) In general
The term "35-percent controlled entity" means—
(i) a corporation in which persons described in subparagraph (A) or (B) of paragraph (1) own more than 35 percent of the total combined voting power,
(ii) a partnership in which such persons own more than 35 percent of the profits interest, and
(iii) a trust or estate in which such persons own more than 35 percent of the beneficial interest.
(B) Constructive ownership rules
Rules similar to the rules of paragraphs (3) and (4) of section 4946(a) shall apply for purposes of this paragraph.
(4) Family members
The members of an individual's family shall be determined under section 4946(d); except that such members also shall include the brothers and sisters (whether by the whole or half blood) of the individual and their spouses.
(5) Taxable period
The term "taxable period" means, with respect to any excess benefit transaction, the period beginning with the date on which the transaction occurs and ending on the earliest of—
(A) the date of mailing a notice of deficiency under section 6212 with respect to the tax imposed by subsection (a)(1), or
(B) the date on which the tax imposed by subsection (a)(1) is assessed.
(6) Correction
The terms "correction" and "correct" mean, with respect to any excess benefit transaction, undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund.
(7) Donors and donor advisors
For purposes of paragraph (1)(E), a person is described in this paragraph if such person—
(A) is described in section 4966(d)(2)(A)(iii),
(B) is a member of the family of an individual described in subparagraph (A), or
(C) is a 35-percent controlled entity (as defined in paragraph (3) by substituting "persons described in subparagraph (A) or (B) of paragraph (7)" for "persons described in subparagraph (A) or (B) of paragraph (1)" in subparagraph (A)(i) thereof).
(8) Investment advisors
For purposes of paragraph (1)(F)—
(A) In general
A person is described in this paragraph if such person—
(i) is an investment advisor,
(ii) is a member of the family of an individual described in clause (i), or
(iii) is a 35-percent controlled entity (as defined in paragraph (3) by substituting "persons described in clause (i) or (ii) of paragraph (8)(A)" for "persons described in subparagraph (A) or (B) of paragraph (1)" in subparagraph (A)(i) thereof).
(B) Investment advisor defined
For purposes of subparagraph (A), the term "investment advisor" means, with respect to any sponsoring organization (as defined in section 4966(d)(1)), any person (other than an employee of such organization) compensated by such organization for managing the investment of, or providing investment advice with respect to, assets maintained in donor advised funds (as defined in section 4966(d)(2)) owned by such organization.
(Added
Editorial Notes
Codification
Sections 1212(a)(3), 1232(a), (b), and 1242(a), (b) of
Amendments
2018—Subsec. (f)(1)(D).
2010—Subsec. (e)(1).
2007—Subsec. (c)(3)(A)(i)(II).
Subsec. (c)(3)(C)(ii).
2006—Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(4).
Subsec. (d)(2).
Subsec. (f)(1)(D).
Subsec. (f)(1)(E).
Subsec. (f)(1)(F).
Subsec. (f)(6).
Subsec. (f)(7), (8).
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 1212(a)(3) of
"(1)
"(2)
Effective Date
Section applicable to excess benefit transactions occurring on or after Sept. 14, 1995, and not applicable to any benefit arising from a transaction pursuant to any written contract which was binding on Sept. 13, 1995, and at all times thereafter before such transaction occurred, see section 1311(d)(1), (2) of
§4959. Taxes on failures by hospital organizations
If a hospital organization to which section 501(r) applies fails to meet the requirement of section 501(r)(3) for any taxable year, there is imposed on the organization a tax equal to $50,000.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to failures occurring after Mar. 23, 2010, see section 9007(f)(3) of
§4960. Tax on excess tax-exempt organization executive compensation
(a) Tax imposed
There is hereby imposed a tax equal to the product of the rate of tax under section 11 and the sum of—
(1) so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus
(2) any excess parachute payment paid by such an organization to any covered employee.
For purposes of the preceding sentence, remuneration shall be treated as paid when there is no substantial risk of forfeiture (within the meaning of section 457(f)(3)(B)) of the rights to such remuneration.
(b) Liability for tax
The employer shall be liable for the tax imposed under subsection (a).
(c) Definitions and special rules
For purposes of this section—
(1) Applicable tax-exempt organization
The term "applicable tax-exempt organization" means any organization which for the taxable year—
(A) is exempt from taxation under section 501(a),
(B) is a farmers' cooperative organization described in section 521(b)(1),
(C) has income excluded from taxation under section 115(1), or
(D) is a political organization described in section 527(e)(1).
(2) Covered employee
For purposes of this section, the term "covered employee" means any employee (including any former employee) of an applicable tax-exempt organization if the employee—
(A) is one of the 5 highest compensated employees of the organization for the taxable year, or
(B) was a covered employee of the organization (or any predecessor) for any preceding taxable year beginning after December 31, 2016.
(3) Remuneration
For purposes of this section:
(A) In general
The term "remuneration" means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)) and shall include amounts required to be included in gross income under section 457(f).
(B) Exception for remuneration for medical services
The term "remuneration" shall not include the portion of any remuneration paid to a licensed medical professional (including a veterinarian) which is for the performance of medical or veterinary services by such professional.
(4) Remuneration from related organizations
(A) In general
Remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity.
(B) Related organizations
A person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity—
(i) controls, or is controlled by, the organization,
(ii) is controlled by one or more persons which control the organization,
(iii) is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization,
(iv) is a supporting organization described in section 509(a)(3) during the taxable year with respect to the organization, or
(v) in the case of an organization which is a voluntary employees' beneficiary association described in section 501(c)(9), establishes, maintains, or makes contributions to such voluntary employees' beneficiary association.
(C) Liability for tax
In any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection (a), each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection (a) with respect to such remuneration as—
(i) the amount of remuneration paid by such employer with respect to such employee, bears to
(ii) the amount of remuneration paid by all such employers to such employee.
(5) Excess parachute payment
For purposes of determining the tax imposed by subsection (a)(2)—
(A) In general
The term "excess parachute payment" means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment.
(B) Parachute payment
The term "parachute payment" means any payment in the nature of compensation to (or for the benefit of) a covered employee if—
(i) such payment is contingent on such employee's separation from employment with the employer, and
(ii) the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount.
(C) Exception
Such term does not include any payment—
(i) described in section 280G(b)(6) (relating to exemption for payments under qualified plans),
(ii) made under or to an annuity contract described in section 403(b) or a plan described in section 457(b),
(iii) to a licensed medical professional (including a veterinarian) to the extent that such payment is for the performance of medical or veterinary services by such professional, or
(iv) to an individual who is not a highly compensated employee as defined in section 414(q).
(D) Base amount
Rules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount.
(E) Property transfers; present value
Rules similar to the rules of paragraphs (3) and (4) of section 280G(d) shall apply.
(6) Coordination with deduction limitation
Remuneration the deduction for which is not allowed by reason of section 162(m) shall not be taken into account for purposes of this section.
(d) Regulations
The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under this section, including regulations to prevent avoidance of such tax through the performance of services other than as an employee or by providing compensation through a pass-through or other entity to avoid such tax.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Subchapter E—Abatement of First and Second Tier Taxes in Certain Cases
Editorial Notes
Amendments
1996—
1987—
1984—
§4961. Abatement of second tier taxes where there is correction
(a) General rule
If any taxable event is corrected during the correction period for such event, then any second tier tax imposed with respect to such event (including interest, additions to the tax, and additional amounts) shall not be assessed, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment.
(b) Supplemental proceeding
If the determination by a court that the taxpayer is liable for a second tier tax has become final, such court shall have jurisdiction to conduct any necessary supplemental proceeding to determine whether the taxable event was corrected during the correction period. Such a supplemental proceeding may be begun only during the period which ends on the 90th day after the last day of the correction period. Where such a supplemental proceeding has begun, the reference in the second sentence of section 6213(a) to a final decision of the Tax Court shall be treated as including a final decision in such supplemental proceeding.
(c) Suspension of period of collection for second tier tax
(1) Proceeding in District Court or United States Court of Federal Claims
If, not later than 90 days after the day on which the second tier tax is assessed, the first tier tax is paid in full and a claim for refund of the amount so paid is filed, no levy or proceeding in court for the collection of the second tier tax shall be made, begun, or prosecuted until a final resolution of a proceeding begun as provided in paragraph (2) (and of any supplemental proceeding with respect thereto under subsection (b)). Notwithstanding section 7421(a), the collection by levy or proceeding may be enjoined during the time such prohibition is in force by a proceeding in the proper court.
(2) Suit must be brought to determine liability
If, within 90 days after the day on which his claim for refund is denied, the person against whom the second tier tax was assessed fails to begin a proceeding described in section 7422 for the determination of his liability for such tax, paragraph (1) shall cease to apply with respect to such tax, effective on the day following the close of the 90-day period referred to in this paragraph.
(3) Suspension of running of period of limitations on collection
The running of the period of limitations provided in section 6502 on the collection by levy or by a proceeding in court with respect to any second tier tax described in paragraph (1) shall be suspended for the period during which the Secretary is prohibited from collecting by levy or a proceeding in court.
(4) Jeopardy collection
If the Secretary makes a finding that the collection of the second tier tax is in jeopardy, nothing in this subsection shall prevent the immediate collection of such tax.
(Added
Editorial Notes
Amendments
2018—Subsec. (c)(1).
1986—Subsec. (c)(1).
Statutory Notes and Related Subsidiaries
Effective Date
"(1)
"(2)
"(3)
§4962. Abatement of first tier taxes in certain cases
(a) General rule
If it is established to the satisfaction of the Secretary that—
(1) a taxable event was due to reasonable cause and not to willful neglect, and
(2) such event was corrected within the correction period for such event,
then any qualified first tier tax imposed with respect to such event (including interest) shall not be assessed and, if assessed, the assessment shall be abated and, if collected, shall be credited or refunded as an overpayment.
(b) Qualified first tier tax
For purposes of this section, the term "qualified first tier tax" means any first tier tax imposed by subchapter A, C, D, or G of this chapter, except that such term shall not include the tax imposed by section 4941(a) (relating to initial tax on self-dealing).
(c) Special rule for tax on political expenditures of section 501(c)(3) organizations
In the case of the tax imposed by section 4955(a), subsection (a)(1) shall be applied by substituting "not willful and flagrant" for "due to reasonable cause and not to willful neglect".
(Added
Editorial Notes
Prior Provisions
A prior section 4962 was renumbered
Amendments
2007—Subsec. (b).
1997—Subsec. (b).
1987—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1987 Amendment
Amendment by
Effective Date
§4963. Definitions
(a) First tier tax
For purposes of this subchapter, the term "first tier tax" means any tax imposed by subsection (a) of section 4941, 4942, 4943, 4944, 4945, 4951, 4952, 4955, 4958, 4966, 4967, 4971, or 4975.
(b) Second tier tax
For purposes of this subchapter, the term "second tier tax" means any tax imposed by subsection (b) of section 4941, 4942, 4943, 4944, 4945, 4951, 4952, 4955, 4958, 4971, or 4975.
(c) Taxable event
For purposes of this subchapter, the term "taxable event" means any act (or failure to act) giving rise to liability for tax under section 4941, 4942, 4943, 4944, 4945, 4951, 4952, 4955, 4958, 4966, 4967, 4971, or 4975.
(d) Correct
For purposes of this subchapter—
(1) In general
Except as provided in paragraph (2), the term "correct" has the same meaning as when used in the section which imposes the second tier tax.
(2) Special rules
The term "correct" means—
(A) in the case of the second tier tax imposed by section 4942(b), reducing the amount of the undistributed income to zero,
(B) in the case of the second tier tax imposed by section 4943(b), reducing the amount of the excess business holdings to zero, and
(C) in the case of the second tier tax imposed by section 4944, removing the investment from jeopardy.
(e) Correction period
For purposes of this subchapter—
(1) In general
The term "correction period" means, with respect to any taxable event, the period beginning on the date on which such event occurs and ending 90 days after the date of mailing under section 6212 of a notice of deficiency with respect to the second tier tax imposed on such taxable event, extended by—
(A) any period in which a deficiency cannot be assessed under section 6213(a) (determined without regard to the last sentence of section 4961(b)), and
(B) any other period which the Secretary determines is reasonable and necessary to bring about correction of the taxable event.
(2) Special rules for when taxable event occurs
For purposes of paragraph (1), the taxable event shall be treated as occurring—
(A) in the case of section 4942, on the first day of the taxable year for which there was a failure to distribute income,
(B) in the case of section 4943, on the first day on which there are excess business holdings,
(C) in the case of section 4971, on the last day of the plan year in which there is an accumulated funding deficiency, and
(D) in any other case, the date on which such event occurred.
(Added
Editorial Notes
Amendments
2006—Subsecs. (a), (c).
1996—Subsecs. (a) to (c).
1987—Subsecs. (a) to (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Effective Date
For effective date of section with respect to any first tier tax and to any second tier tax, see section 2(d) of
Subchapter F—Tax Shelter Transactions
§4965. Excise tax on certain tax-exempt entities entering into prohibited tax shelter transactions
(a) Being a party to and approval of prohibited transactions
(1) Tax-exempt entity
(A) In general
If a transaction is a prohibited tax shelter transaction at the time any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) becomes a party to the transaction, such entity shall pay a tax for the taxable year in which the entity becomes such a party and any subsequent taxable year in the amount determined under subsection (b)(1).
(B) Post-transaction determination
If any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) is a party to a subsequently listed transaction at any time during a taxable year, such entity shall pay a tax for such taxable year in the amount determined under subsection (b)(1).
(2) Entity manager
If any entity manager of a tax-exempt entity approves such entity as (or otherwise causes such entity to be) a party to a prohibited tax shelter transaction at any time during the taxable year and knows or has reason to know that the transaction is a prohibited tax shelter transaction, such manager shall pay a tax for such taxable year in the amount determined under subsection (b)(2).
(b) Amount of tax
(1) Entity
In the case of a tax-exempt entity—
(A) In general
Except as provided in subparagraph (B), the amount of the tax imposed under subsection (a)(1) with respect to any transaction for a taxable year shall be an amount equal to the product of the highest rate of tax under section 11, and the greater of—
(i) the entity's net income (after taking into account any tax imposed by this subtitle (other than by this section) with respect to such transaction) for such taxable year which—
(I) in the case of a prohibited tax shelter transaction (other than a subsequently listed transaction), is attributable to such transaction, or
(II) in the case of a subsequently listed transaction, is attributable to such transaction and which is properly allocable to the period beginning on the later of the date such transaction is identified by guidance as a listed transaction by the Secretary or the first day of the taxable year, or
(ii) 75 percent of the proceeds received by the entity for the taxable year which—
(I) in the case of a prohibited tax shelter transaction (other than a subsequently listed transaction), are attributable to such transaction, or
(II) in the case of a subsequently listed transaction, are attributable to such transaction and which are properly allocable to the period beginning on the later of the date such transaction is identified by guidance as a listed transaction by the Secretary or the first day of the taxable year.
(B) Increase in tax for certain knowing transactions
In the case of a tax-exempt entity which knew, or had reason to know, a transaction was a prohibited tax shelter transaction at the time the entity became a party to the transaction, the amount of the tax imposed under subsection (a)(1)(A) with respect to any transaction for a taxable year shall be the greater of—
(i) 100 percent of the entity's net income (after taking into account any tax imposed by this subtitle (other than by this section) with respect to the prohibited tax shelter transaction) for such taxable year which is attributable to the prohibited tax shelter transaction, or
(ii) 75 percent of the proceeds received by the entity for the taxable year which are attributable to the prohibited tax shelter transaction.
This subparagraph shall not apply to any prohibited tax shelter transaction to which a tax-exempt entity became a party on or before the date of the enactment of this section.
(2) Entity manager
In the case of each entity manager, the amount of the tax imposed under subsection (a)(2) shall be $20,000 for each approval (or other act causing participation) described in subsection (a)(2).
(c) Tax-exempt entity
For purposes of this section, the term "tax-exempt entity" means an entity which is—
(1) described in section 501(c) or 501(d),
(2) described in section 170(c) (other than the United States),
(3) an Indian tribal government (within the meaning of section 7701(a)(40)),
(4) described in paragraph (1), (2), or (3) of section 4979(e),
(5) a program described in section 529,
(6) an eligible deferred compensation plan described in section 457(b) which is maintained by an employer described in section 457(e)(1)(A),
(7) an arrangement described in section 4973(a), or
(8) a program described in section 529A.
(d) Entity manager
For purposes of this section, the term "entity manager" means—
(1) in the case of an entity described in paragraph (1), (2), or (3) of subsection (c)—
(A) the person with authority or responsibility similar to that exercised by an officer, director, or trustee of an organization, and
(B) with respect to any act, the person having authority or responsibility with respect to such act, and
(2) in the case of an entity described in paragraph (4), (5), (6), or (7) of subsection (c), the person who approves or otherwise causes the entity to be a party to the prohibited tax shelter transaction.
(e) Prohibited tax shelter transaction; subsequently listed transaction
For purposes of this section—
(1) Prohibited tax shelter transaction
(A) In general
The term "prohibited tax shelter transaction" means—
(i) any listed transaction, and
(ii) any prohibited reportable transaction.
(B) Listed transaction
The term "listed transaction" has the meaning given such term by section 6707A(c)(2).
(C) Prohibited reportable transaction
The term "prohibited reportable transaction" means any confidential transaction or any transaction with contractual protection (as defined under regulations prescribed by the Secretary) which is a reportable transaction (as defined in section 6707A(c)(1)).
(2) Subsequently listed transaction
The term "subsequently listed transaction" means any transaction to which a tax-exempt entity is a party and which is determined by the Secretary to be a listed transaction at any time after the entity has become a party to the transaction. Such term shall not include a transaction which is a prohibited reportable transaction at the time the entity became a party to the transaction.
(f) Regulatory authority
The Secretary is authorized to promulgate regulations which provide guidance regarding the determination of the allocation of net income or proceeds of a tax-exempt entity attributable to a transaction to various periods, including before and after the listing of the transaction or the date which is 90 days after the date of the enactment of this section.
(g) Coordination with other taxes and penalties
The tax imposed by this section is in addition to any other tax, addition to tax, or penalty imposed under this title.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsecs. (b)(1)(B) and (f), is the date of enactment of
Amendments
2014—Subsec. (c)(8).
2007—Subsec. (c)(6).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date
"(1)
"(2)
Subchapter G—Donor Advised Funds
Editorial Notes
Codification
§4966. Taxes on taxable distributions
(a) Imposition of taxes
(1) On the sponsoring organization
There is hereby imposed on each taxable distribution a tax equal to 20 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the sponsoring organization with respect to the donor advised fund.
(2) On the fund management
There is hereby imposed on the agreement of any fund manager to the making of a distribution, knowing that it is a taxable distribution, a tax equal to 5 percent of the amount thereof. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the making of the distribution.
(b) Special rules
For purposes of subsection (a)—
(1) Joint and several liability
If more than one person is liable under subsection (a)(2) with respect to the making of a taxable distribution, all such persons shall be jointly and severally liable under such paragraph with respect to such distribution.
(2) Limit for management
With respect to any one taxable distribution, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000.
(c) Taxable distribution
For purposes of this section—
(1) In general
The term "taxable distribution" means any distribution from a donor advised fund—
(A) to any natural person, or
(B) to any other person if—
(i) such distribution is for any purpose other than one specified in section 170(c)(2)(B), or
(ii) the sponsoring organization does not exercise expenditure responsibility with respect to such distribution in accordance with section 4945(h).
(2) Exceptions
Such term shall not include any distribution from a donor advised fund—
(A) to any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization),
(B) to the sponsoring organization of such donor advised fund, or
(C) to any other donor advised fund.
(d) Definitions
For purposes of this subchapter—
(1) Sponsoring organization
The term "sponsoring organization" means any organization which—
(A) is described in section 170(c) (other than in paragraph (1) thereof, and without regard to paragraph (2)(A) thereof),
(B) is not a private foundation (as defined in section 509(a)), and
(C) maintains 1 or more donor advised funds.
(2) Donor advised fund
(A) In general
Except as provided in subparagraph (B) or (C), the term "donor advised fund" means a fund or account—
(i) which is separately identified by reference to contributions of a donor or donors,
(ii) which is owned and controlled by a sponsoring organization, and
(iii) with respect to which a donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor's status as a donor.
(B) Exceptions
The term "donor advised fund" shall not include any fund or account—
(i) which makes distributions only to a single identified organization or governmental entity, or
(ii) with respect to which a person described in subparagraph (A)(iii) advises as to which individuals receive grants for travel, study, or other similar purposes, if—
(I) such person's advisory privileges are performed exclusively by such person in the person's capacity as a member of a committee all of the members of which are appointed by the sponsoring organization,
(II) no combination of persons described in subparagraph (A)(iii) (or persons related to such persons) control, directly or indirectly, such committee, and
(III) all grants from such fund or account are awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the board of directors of the sponsoring organization, and such procedure is designed to ensure that all such grants meet the requirements of paragraph (1), (2), or (3) of section 4945(g).
(C) Secretarial authority
The Secretary may exempt a fund or account not described in subparagraph (B) from treatment as a donor advised fund—
(i) if such fund or account is advised by a committee not directly or indirectly controlled by the donor or any person appointed or designated by the donor for the purpose of advising with respect to distributions from such fund (and any related parties), or
(ii) if such fund benefits a single identified charitable purpose.
(3) Fund manager
The term "fund manager" means, with respect to any sponsoring organization—
(A) an officer, director, or trustee of such sponsoring organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the sponsoring organization), and
(B) with respect to any act (or failure to act), the employees of the sponsoring organization having authority or responsibility with respect to such act (or failure to act).
(4) Disqualified supporting organization
(A) In general
The term "disqualified supporting organization" means, with respect to any distribution—
(i) any type III supporting organization (as defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as defined in section 4943(f)(5)(B)), and
(ii) any organization which is described in subparagraph (B) or (C) if—
(I) the donor or any person designated by the donor for the purpose of advising with respect to distributions from a donor advised fund (and any related parties) directly or indirectly controls a supported organization (as defined in section 509(f)(3)) of such organization, or
(II) the Secretary determines by regulations that a distribution to such organization otherwise is inappropriate.
(B) Type I and type II supporting organizations
An organization is described in this subparagraph if the organization meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and is—
(i) operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2) of section 509(a), or
(ii) supervised or controlled in connection with one or more such organizations.
(C) Functionally integrated type III supporting organizations
An organization is described in this subparagraph if the organization is a functionally integrated type III supporting organization (as defined under section 4943(f)(5)(B)).
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Aug. 17, 2006, see section 1231(c) of
§4967. Taxes on prohibited benefits
(a) Imposition of taxes
(1) On the donor, donor advisor, or related person
There is hereby imposed on the advice of any person described in subsection (d) to have a sponsoring organization make a distribution from a donor advised fund which results in such person or any other person described in subsection (d) receiving, directly or indirectly, a more than incidental benefit as a result of such distribution, a tax equal to 125 percent of such benefit. The tax imposed by this paragraph shall be paid by any person described in subsection (d) who advises as to the distribution or who receives such a benefit as a result of the distribution.
(2) On the fund management
There is hereby imposed on the agreement of any fund manager to the making of a distribution, knowing that such distribution would confer a benefit described in paragraph (1), a tax equal to 10 percent of the amount of such benefit. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the making of the distribution.
(b) Exception
No tax shall be imposed under this section with respect to any distribution if a tax has been imposed with respect to such distribution under section 4958.
(c) Special rules
For purposes of subsection (a)—
(1) Joint and several liability
If more than one person is liable under paragraph (1) or (2) of subsection (a) with respect to a distribution described in subsection (a), all such persons shall be jointly and severally liable under such paragraph with respect to such distribution.
(2) Limit for management
With respect to any one distribution described in subsection (a), the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000.
(d) Person described
A person is described in this subsection if such person is described in section 4958(f)(7) with respect to a donor advised fund.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Aug. 17, 2006, see section 1231(c) of
Subchapter H—Excise Tax Based on Investment Income of Private Colleges and Universities
§4968. Excise tax based on investment income of private colleges and universities
(a) Tax imposed
There is hereby imposed on each applicable educational institution for the taxable year a tax equal to 1.4 percent of the net investment income of such institution for the taxable year.
(b) Applicable educational institution
For purposes of this subchapter—
(1) In general
The term "applicable educational institution" means an eligible educational institution (as defined in section 25A(f)(2))—
(A) which had at least 500 tuition-paying students during the preceding taxable year,
(B) more than 50 percent of the tuition-paying students of which are located in the United States,
(C) which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges and universities), and
(D) the aggregate fair market value of the assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution's exempt purpose) is at least $500,000 per student of the institution.
(2) Students
For purposes of paragraph (1), the number of students of an institution (including for purposes of determining the number of students at a particular location) shall be based on the daily average number of full-time students attending such institution (with part-time students taken into account on a full-time student equivalent basis).
(c) Net investment income
For purposes of this section, net investment income shall be determined under rules similar to the rules of section 4940(c).
(d) Assets and net investment income of related organizations
(1) In general
For purposes of subsections (b)(1)(C) and (c), assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income, respectively, of the educational institution, except that—
(A) no such amount shall be taken into account with respect to more than 1 educational institution, and
(B) unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account.
(2) Related organization
For purposes of this subsection, the term "related organization" means, with respect to an educational institution, any organization which—
(A) controls, or is controlled by, such institution,
(B) is controlled by 1 or more persons which also control such institution, or
(C) is a supported organization (as defined in section 509(f)(3)), or an organization described in section 509(a)(3), during the taxable year with respect to such institution.
(Added
Editorial Notes
Amendments
2018—Subsec. (b)(1)(A).
Subsec. (b)(1)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Effective Date
CHAPTER 43 —QUALIFIED PENSION, ETC., PLANS
Editorial Notes
Amendments
2019—
2010—
2003—
2002—
2001—
1998—
1996—
1989—
1988—
1987—
1986—
1984—
1982—
1974—
1 Section repealed by
§4971. Taxes on failure to meet minimum funding standards
(a) Initial tax
If at any time during any taxable year an employer maintains a plan to which section 412 applies, there is hereby imposed for the taxable year a tax equal to—
(1) in the case of a single-employer plan, 10 percent of the aggregate unpaid minimum required contributions for all plan years remaining unpaid as of the end of any plan year ending with or within the taxable year,
(2) in the case of a multiemployer plan, 5 percent of the accumulated funding deficiency determined under section 431 as of the end of any plan year ending with or within the taxable year, and
(3) in the case of a CSEC plan, 10 percent of the CSEC accumulated funding deficiency as of the end of the plan year ending with or within the taxable year.
(b) Additional tax
If—
(1) a tax is imposed under subsection (a)(1) on any unpaid minimum required contribution and such amount remains unpaid as of the close of the taxable period,
(2) a tax is imposed under subsection (a)(2) on any accumulated funding deficiency and the accumulated funding deficiency is not corrected within the taxable period, or
(3) a tax is imposed under subsection (a)(3) on any CSEC accumulated funding deficiency and the CSEC accumulated funding deficiency is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the unpaid minimum required contribution, accumulated funding deficiency, or CSEC accumulated funding deficiency, whichever is applicable, to the extent not so paid or corrected.
(c) Definitions
For purposes of this section—
(1) Accumulated funding deficiency
The term "accumulated funding deficiency" has the meaning given to such term by section 431.
(2) Correct
The term "correct" means, with respect to an accumulated funding deficiency or CSEC accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency or CSEC accumulated funding deficiency as of the end of a plan year in which such deficiency arose to zero.
(3) Taxable period
The term "taxable period" means, with respect to an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, the period beginning with the end of the plan year in which there is an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, and ending on the earlier of—
(A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a), or
(B) the date on which the tax imposed by subsection (a) is assessed.
(4) Unpaid minimum required contribution
(A) In general
The term "unpaid minimum required contribution" means, with respect to any plan year, any minimum required contribution under section 430 for the plan year which is not paid on or before the due date (as determined under section 430(j)(1)) for the plan year.
(B) Ordering rule
Any payment to or under a plan for any plan year shall be allocated first to unpaid minimum required contributions for all preceding plan years on a first-in, first-out basis and then to the minimum required contribution under section 430 for the plan year.
(5) CSEC accumulated funding deficiency
The term "CSEC accumulated funding deficiency" means the accumulated funding deficiency determined under section 433.
(d) Notification of the Secretary of Labor
Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)—
(1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, or
(2) to comment on the imposition of such tax.
(e) Liability for tax
(1) In general
Except as provided in paragraph (2), the tax imposed by subsection (a), (b), or (f) shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(a)(2).
(2) Joint and several liability where employer member of controlled group
(A) In general
If an employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for the tax imposed by subsection (a), (b), (f), or (g).
(B) Controlled group
For purposes of subparagraph (A), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
(f) Failure to pay liquidity shortfall
(1) In general
In the case of a plan to which section 430(j)(4) or 433(f) applies, there is hereby imposed a tax of 10 percent of the excess (if any) of—
(A) the amount of the liquidity shortfall for any quarter, over
(B) the amount of such shortfall which is paid by the required installment under section 430(j) or 433(f), whichever is applicable, for such quarter (but only if such installment is paid on or before the due date for such installment).
(2) Additional tax
If the plan has a liquidity shortfall as of the close of any quarter and as of the close of each of the following 4 quarters, there is hereby imposed a tax equal to 100 percent of the amount on which tax was imposed by paragraph (1) for such first quarter.
(3) Definitions and special rule
(A) Liquidity shortfall; quarter
For purposes of this subsection, the terms "liquidity shortfall" and "quarter" have the respective meanings given such terms by section 430(j) or 433(f), whichever is applicable.
(B) Special rule
If the tax imposed by paragraph (2) is paid with respect to any liquidity shortfall for any quarter, no further tax shall be imposed by this subsection on such shortfall for such quarter.
(4) Waiver by Secretary
If the taxpayer establishes to the satisfaction of the Secretary that—
(A) the liquidity shortfall described in paragraph (1) was due to reasonable cause and not willful neglect, and
(B) reasonable steps have been taken to remedy such liquidity shortfall,
the Secretary may waive all or part of the tax imposed by this subsection.
(g) Multiemployer plans in endangered or critical status
(1) In general
Except as provided in this subsection—
(A) no tax shall be imposed under this section for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in critical status pursuant to section 432, and
(B) any tax imposed under this subsection for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in endangered status pursuant to section 432 shall be in addition to any other tax imposed by this section.
(2) Failure to comply with funding improvement or rehabilitation plan
(A) In general
If any funding improvement plan or rehabilitation plan in effect under section 432 with respect to a multiemployer plan requires an employer to make a contribution to the plan, there is hereby imposed a tax on each failure of the employer to make the required contribution within the time required under such plan.
(B) Amount of tax
The amount of the tax imposed by subparagraph (A) shall be equal to the amount of the required contribution the employer failed to make in a timely manner.
(C) Liability for tax
The tax imposed by subparagraph (A) shall be paid by the employer responsible for contributing to or under the rehabilitation plan which fails to make the contribution.
(3) Failure to meet requirements for plans in endangered or critical status
If—
(A) a plan which is in seriously endangered status fails to meet the applicable benchmarks by the end of the funding improvement period, or
(B) a plan which is in critical status either—
(i) fails to meet the requirements of section 432(e) by the end of the rehabilitation period, or
(ii) has received a certification under section 432(b)(3)(A)(ii) for 3 consecutive plan years that the plan is not making the scheduled progress in meeting its requirements under the rehabilitation plan,
the plan shall be treated as having an accumulated funding deficiency for purposes of this section for the last plan year in such funding improvement, rehabilitation, or 3-consecutive year period (and each succeeding plan year until such benchmarks or requirements are met) in an amount equal to the greater of the amount of the contributions necessary to meet such benchmarks or requirements or the amount of such accumulated funding deficiency without regard to this paragraph.
(4) Failure to adopt rehabilitation plan
(A) In general
In the case of a multiemployer plan which is in critical status, there is hereby imposed a tax on the failure of such plan to adopt a rehabilitation plan within the time prescribed under section 432.
(B) Amount of tax
The amount of the tax imposed under subparagraph (A) with respect to any plan sponsor for any taxable year shall be the greater of—
(i) the amount of tax imposed under subsection (a) for the taxable year (determined without regard to this subsection), or
(ii) the amount equal to $1,100 multiplied by the number of days during the taxable year which are included in the period beginning on the day following the close of the 240-day period described in section 432(e)(1)(A) and ending on the day on which the rehabilitation plan is adopted.
(C) Liability for tax
(i) In general
The tax imposed by subparagraph (A) shall be paid by each plan sponsor.
(ii) Plan sponsor
For purposes of clause (i), the term "plan sponsor" has the meaning given such term by section 432(j)(9).
(5) Waiver
In the case of a failure described in paragraph (2) or (3) which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by this subsection. For purposes of this paragraph, reasonable cause includes unanticipated and material market fluctuations, the loss of a significant contributing employer, or other factors to the extent that the payment of tax under this subsection with respect to the failure would be excessive or otherwise inequitable relative to the failure involved.
(6) Terms used in section 432
For purposes of this subsection, any term used in this subsection which is also used in section 432 shall have the meaning given such term by section 432.
(h) Failure of a CSEC plan sponsor to adopt funding restoration plan
(1) In general
In the case of a CSEC plan that is in funding restoration status (within the meaning of section 433(j)(5)(A)), there is hereby imposed a tax on the failure of such plan to adopt a funding restoration plan within the time prescribed under section 433(j)(3).
(2) Amount of tax
The amount of the tax imposed under paragraph (1) with respect to any plan sponsor for any taxable year shall be the amount equal to $100 multiplied by the number of days during the taxable year which are included in the period beginning on the day following the close of the 180-day period described in section 433(j)(3) and ending on the day on which the funding restoration plan is adopted.
(3) Waiver by Secretary
In the case of a failure described in paragraph (1) which the Secretary determines is due to reasonable cause and not to willful neglect, the Secretary may waive a portion or all of the tax imposed by such paragraph.
(4) Liability for tax
The tax imposed by paragraph (1) shall be paid by the plan sponsor (within the meaning of section 433(j)(5)(E)).
(i) Cross references
For disallowance of deduction for taxes paid under this section, see section 275.
For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6).
For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.
(Added
Editorial Notes
References in Text
Section 3002(b) of title III of the Employee Retirement Income Security Act of 1974, referred to in subsec. (i), is classified to
Amendments
2018—Subsec. (b).
Subsec. (c)(3).
Subsec. (d).
Subsec. (f)(1)(B).
Subsec. (g)(4)(C)(ii).
2014—Subsec. (a)(3).
Subsec. (b).
Subsec. (b)(3).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(5).
Subsec. (d)(1).
Subsec. (f)(1).
Subsec. (f)(1)(B).
Subsec. (f)(3)(A).
Subsecs. (h), (i).
2008—Subsec. (b)(1).
Subsec. (c)(3).
Subsec. (d)(1).
Subsec. (e)(1).
Subsec. (e)(2)(A).
Subsec. (g)(4)(B)(ii).
Subsec. (g)(4)(C)(ii).
2006—Subsecs. (a), (b).
"(a)
"(b)
Subsec. (c)(1).
Subsec. (c)(4).
Subsec. (e)(1).
Subsec. (e)(2)(A).
Subsec. (f)(1).
Subsecs. (g), (h).
1996—Subsec. (f)(4).
1994—Subsec. (e)(1), (2)(A).
Subsecs. (f), (g).
1987—Subsec. (a).
Subsec. (b).
Subsecs. (e), (f).
1980—Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(3).
Subsec. (d).
1976—Subsecs. (c), (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 114(e)(1)–(4) of
Amendment by section 212(b) of
Effective Date of 1996 Amendment
Effective Date of 1994 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by section 9305(a) of
Effective Date of 1980 Amendments
For effective date of amendment by
Amendment by
Effective Date
Section applicable, except as otherwise provided in section 1017(c) through (i) of
Savings Provision
For provisions that nothing in amendment by section 401(b)(44) of
Applicability of Amendments by Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of amendments by subtitles A (§§101–108) and B (§§111–116) of title I of
Special Rule for Certain Benefits Funded Under an Agreement Approved by the Pension Benefit Guaranty Corporation
For applicability of amendment by section 212(b) of
Exemption From Excise Taxes for Certain Multiemployer Pension Plans
"(a)
"(1) the taxable year in which the plan sponsor adopts a rehabilitation plan under section 305(e) of the Employee Retirement Income Security Act of 1974 [
"(2) the taxable year that contains January 1, 2009.
"(b)
"(1) with less than 100 participants;
"(2) with respect to which the contributing employers participated in a Federal fishery capacity reduction program;
"(3) with respect to which employers under the plan participated in the Northeast Fisheries Assistance Program; and
"(4) with respect to which the annual normal cost is less than $100,000 and the plan is experiencing a funding deficiency on the date of enactment of this Act [Aug. 17, 2006]."
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
§4972. Tax on nondeductible contributions to qualified employer plans
(a) Tax imposed
In the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer).
(b) Employer liable for tax
The tax imposed by this section shall be paid by the employer making the contributions.
(c) Nondeductible contributions
For purposes of this section—
(1) In general
The term "nondeductible contributions" means, with respect to any qualified employer plan, the sum of—
(A) the excess (if any) of—
(i) the amount contributed for the taxable year by the employer to or under such plan, over
(ii) the amount allowable as a deduction under section 404 for such contributions (determined without regard to subsection (e) thereof), and
(B) the amount determined under this subsection for the preceding taxable year reduced by the sum of—
(i) the portion of the amount so determined returned to the employer during the taxable year, and
(ii) the portion of the amount so determined deductible under section 404 for the taxable year (determined without regard to subsection (e) thereof).
(2) Ordering rule for section 404
For purposes of paragraph (1), the amount allowable as a deduction under section 404 for any taxable year shall be treated as—
(A) first from carryforwards to such taxable year from preceding taxable years (in order of time), and
(B) then from contributions made during such taxable year.
(3) Contributions which may be returned to employer
In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account any contribution for such taxable year which is distributed to the employer in a distribution described in section 4980(c)(2)(B)(ii) if such distribution is made on or before the last day on which a contribution may be made for such taxable year under section 404(a)(6).
(4) Special rule for self-employed individuals
For purposes of paragraph (1), if—
(A) the amount which is required to be contributed to a plan under section 412 on behalf of an individual who is an employee (within the meaning of section 401(c)(1)), exceeds
(B) the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established,
such excess shall be treated as an amount allowable as a deduction under section 404.
(5) Pre-1987 contributions
The term "nondeductible contribution" shall not include any contribution made for a taxable year beginning before January 1, 1987.
(6) Exceptions
In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account—
(A) so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed the amount of contributions described in section 401(m)(4)(A), or
(B) so much of the contributions to a simple retirement account (within the meaning of section 408(p)), a simple plan (within the meaning of section 401(k)(11)), or a simplified employee pension (within the meaning of section 408(k)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer.
For purposes of subparagraph (A), the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to a defined benefit plan and then to amounts described in subparagraph (A). Subparagraph (B) shall not apply to contributions made on behalf of the employer or a member of the employer's family (as defined in section 447(e)(1)).1
(7) Defined benefit plan exception
In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431(c)(6)). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year.
(d) Definitions
For purposes of this section—
(1) Qualified employer plan
(A) In general
The term "qualified employer plan" means—
(i) any plan meeting the requirements of section 401(a) which includes a trust exempt from tax under section 501(a),
(ii) an annuity plan described in section 403(a),
(iii) any simplified employee pension (within the meaning of section 408(k)), and
(iv) any simple retirement account (within the meaning of section 408(p)).
(B) Exemption for governmental and tax exempt plans
The term "qualified employer plan" does not include a plan described in subparagraph (A) or (B) of section 4980(c)(1).
(2) Employer
In the case of a plan which provides contributions or benefits for employees some or all of whom are self-employed individuals within the meaning of section 401(c)(1), the term "employer" means the person treated as the employer under section 401(c)(4).
(Added
Editorial Notes
References in Text
Section 447(e), referred to in subsec. (c)(6), was repealed and provisions were redesignated as section 447(e) which do not relate to members of the employer's family by
Prior Provisions
A prior section, added
Amendments
2022—Subsec. (c)(6)(B).
2006—Subsec. (c)(6)(A).
"(i) the amount of contributions not in excess of 6 percent of compensation (within the meaning of section 404(a) and as adjusted under section 404(a)(12)) paid or accrued (during the taxable year for which the contributions were made) to beneficiaries under the plans, or
"(ii) the amount of contributions described in section 401(m)(4)(A), or".
Subsec. (c)(7).
2004—Subsec. (c)(6).
Subsec. (c)(6)(A)(ii).
"(I) the amount of contributions described in section 401(m)(4)(A), plus
"(II) the amount of contributions described in section 402(g)(3)(A), or".
2001—Subsec. (c)(6).
Subsec. (c)(6)(A).
"(i) the plan is covered under section 4021 of the Employee Retirement Income Security Act of 1974, and
"(ii) the plan is terminated under section 4041(b) of such Act on or before the last day of the taxable year,".
Subsec. (c)(6)(B).
Subsec. (c)(6)(B)(i).
Subsec. (c)(6)(C).
Subsec. (c)(7).
1997—Subsec. (c)(6)(B).
1996—Subsec. (d)(1)(A)(iv).
1994—Subsec. (c)(6).
1988—Subsec. (c).
Subsec. (c)(4), (5).
Subsec. (d)(1).
"(A) any plan meeting the requirements of section 401(a) which includes a trust exempt from the tax under section 501(a),
"(B) an annuity plan described in section 403(a), and
"(C) any simplified employee pension (within the meaning of section 408(k))."
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
Effective Date of 2006 Amendment
Amendment by section 114(e)(5) of
Amendment by section 803(c) of
Effective Date of 2004 Amendment
Amendment by section 404(c) of
Effective Date of 2001 Amendment
Amendment by section 616(b)(2)(B) of
Amendment by section 652(b) of
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1994 Amendment
"(1)
"(2)
Effective Date of 1988 Amendment
Amendment by section 1011A(e)(1), (2) of
Amendment by section 2005(a)(1) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1986, with special rules in case of plans maintained pursuant to collective bargaining agreements, see section 1131(d) of
Construction of 2001 Amendment
Applicability of Amendments by Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of amendments by subtitles A (§§101–108) and B (§§111–116) of title I of
Increase in Amount for Plan Termination Insurance Under Employee Retirement Insurance Security Act of 1974
"(A) the liabilities of such plan (determined as if the plan had terminated as of such time), exceed
"(B) the assets of such plan."
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
1 See References in Text note below.
§4973. Tax on excess contributions to certain tax-favored accounts and annuities
(a) Tax imposed
In the case of—
(1) an individual retirement account (within the meaning of section 408(a)),
(2) an Archer MSA (within the meaning of section 220(d)),
(3) an individual retirement annuity (within the meaning of section 408(b)), a custodial account treated as an annuity contract under section 403(b)(7)(A) (relating to custodial accounts for regulated investment company stock),
(4) a Coverdell education savings account (as defined in section 530),
(5) a health savings account (within the meaning of section 223(d)), or
(6) an ABLE account (within the meaning of section 529A),
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 or annuities (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 or annuity (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) Excess contributions
For purposes of this section, in the case of individual retirement accounts or individual retirement annuities, the term "excess contributions" means the sum of—
(1) the excess (if any) of—
(A) the amount contributed for the taxable year to the accounts or for the annuities (other than a contribution to a Roth IRA or a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16)), over
(B) the amount allowable as a deduction under section 219 for such contributions, and
(2) the amount determined under this subsection for the preceding taxable year reduced by the sum of—
(A) the distributions out of the account for the taxable year which were included in the gross income of the payee under section 408(d)(1),
(B) the distributions out of the account for the taxable year to which section 408(d)(5) applies, and
(C) the excess (if any) of the maximum amount allowable as a deduction under section 219 for the taxable year over the amount contributed (determined without regard to section 219(f)(6)) to the accounts or for the annuities (including the amount contributed to a Roth IRA) for the taxable year.
For purposes of this subsection, any contribution which is distributed from the individual retirement account or the individual retirement annuity in a distribution to which section 408(d)(4) applies shall be treated as an amount not contributed. For purposes of paragraphs (1)(B) and (2)(C), the amount allowable as a deduction under section 219 shall be computed without regard to section 219(g). Such term shall not include any designated nondeductible contribution (as defined in subparagraph (C) of section 408(o)(2)) which does not exceed the nondeductible limit under subparagraph (B) thereof by reason of an election under section 408(o)(5).
(c) Section 403(b) contracts
For purposes of this section, in the case of a custodial account referred to in subsection (a)(3), the term "excess contributions" means the sum of—
(1) the excess (if any) of the amount contributed for the taxable year to such account (other than a rollover contribution described in section 403(b)(8) or 408(d)(3)(A)(iii)), over the lesser of the amount excludable from gross income under section 403(b) or the amount permitted to be contributed under the limitations contained in section 415 (or under whichever such section is applicable, if only one is applicable), and
(2) the amount determined under this subsection for the preceding taxable year, reduced by—
(A) the excess (if any) of the lesser of (i) the amount excludable from gross income under section 403(b) or (ii) the amount permitted to be contributed under the limitations contained in section 415 over the amount contributed to the account for the taxable year (or under whichever such section is applicable, if only one is applicable), and
(B) the sum of the distributions out of the account (for all prior taxable years) which are included in gross income under section 72(e).
(d) Excess contributions to Archer MSAs
For purposes of this section, in the case of Archer MSAs (within the meaning of section 220(d)), the term "excess contributions" means the sum of—
(1) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 220(f)(5)) which is neither excludable from gross income under section 106(b) nor allowable as a deduction under section 220 for such year, and
(2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(A) the distributions out of the accounts which were included in gross income under section 220(f)(2), and
(B) the excess (if any) of—
(i) the maximum amount allowable as a deduction under section 220(b)(1) (determined without regard to section 106(b)) for the taxable year, over
(ii) the amount contributed to the accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed out of the Archer MSA in a distribution to which section 220(f)(3) or section 138(c)(3) applies shall be treated as an amount not contributed.
(e) Excess contributions to Coverdell education savings accounts
For purposes of this section—
(1) In general
In the case of Coverdell education savings accounts maintained for the benefit of any one beneficiary, the term "excess contributions" means the sum of—
(A) the amount by which the amount contributed for the taxable year to such accounts exceeds $2,000 (or, if less, the sum of the maximum amounts permitted to be contributed under section 530(c) by the contributors to such accounts for such year); and
(B) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(i) the distributions out of the accounts for the taxable year (other than rollover distributions); and
(ii) the excess (if any) of the maximum amount which may be contributed to the accounts for the taxable year over the amount contributed to the accounts for the taxable year.
(2) Special rules
For purposes of paragraph (1), the following contributions shall not be taken into account:
(A) Any contribution which is distributed out of the Coverdell education savings account in a distribution to which section 530(d)(4)(C) applies.
(B) Any rollover contribution.
(f) Excess contributions to Roth IRAs
For purposes of this section, in the case of contributions to a Roth IRA (within the meaning of section 408A(b)), the term "excess contributions" means the sum of—
(1) the excess (if any) of—
(A) the amount contributed for the taxable year to Roth IRAs (other than a qualified rollover contribution described in section 408A(e)), over
(B) the amount allowable as a contribution under sections 408A(c)(2) and (c)(3), and
(2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(A) the distributions out of the accounts for the taxable year, and
(B) the excess (if any) of the maximum amount allowable as a contribution under sections 408A(c)(2) and (c)(3) for the taxable year over the amount contributed by the individual to all individual retirement plans for the taxable year.
For purposes of this subsection, any contribution which is distributed from a Roth IRA in a distribution described in section 408(d)(4) shall be treated as an amount not contributed.
(g) Excess contributions to health savings accounts
For purposes of this section, in the case of health savings accounts (within the meaning of section 223(d)), the term "excess contributions" means the sum of—
(1) the aggregate amount contributed for the taxable year to the accounts (other than a rollover contribution described in section 220(f)(5) or 223(f)(5)) which is neither excludable from gross income under section 106(d) nor allowable as a deduction under section 223 for such year, and
(2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(A) the distributions out of the accounts which were included in gross income under section 223(f)(2), and
(B) the excess (if any) of—
(i) the maximum amount allowable as a deduction under section 223(b) (determined without regard to section 106(d)) for the taxable year, over
(ii) the amount contributed to the accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed out of the health savings account in a distribution to which section 223(f)(3) applies shall be treated as an amount not contributed.
(h) Excess contributions to ABLE account
For purposes of this section—
(1) In general
In the case of an ABLE account (within the meaning of section 529A), the term "excess contributions" means the amount by which the amount contributed for the taxable year to such account (other than contributions under section 529A(c)(1)(C)) exceeds the contribution limit under section 529A(b)(2)(B).
(2) Special rule
For purposes of this subsection, any contribution which is distributed out of the ABLE account in a distribution to which the last sentence of section 529A(b)(2) applies shall be treated as an amount not contributed.
(Added
Editorial Notes
Amendments
2022—Subsec. (b).
2014—Subsec. (a)(6).
Subsec. (h).
2004—Subsec. (c).
2003—Subsec. (a)(5).
Subsec. (g).
2001—Subsec. (a)(4).
Subsec. (b)(1)(A).
Subsec. (e).
Subsec. (e)(1).
Subsec. (e)(1)(A).
Subsec. (e)(1)(B), (C).
Subsec. (e)(2)(A).
2000—Subsec. (a)(2).
Subsec. (d).
1998—
Subsec. (b)(1)(A).
Subsec. (b)(2)(C).
Subsec. (e)(1).
"(A) the amount by which the amount contributed for the taxable year to such accounts exceeds $500, and
"(B) any amount contributed to such accounts for any taxable year if any amount is contributed during such year to a qualified State tuition program for the benefit of such beneficiary."
Subsec. (e)(2)(B), (C).
Subsec. (f).
Subsec. (f)(1)(A).
Subsec. (f)(2)(B).
1997—Subsec. (a)(4).
Subsec. (d).
Subsec. (e).
Subsec. (f).
1996—
Subsec. (a).
Subsec. (b)(1)(A).
Subsec. (d).
1992—Subsec. (b)(1)(A).
1988—Subsec. (b).
1986—Subsec. (b).
1984—
Subsec. (a).
Subsec. (b).
Subsec. (b)(1)(A).
Subsec. (c)(1).
1981—Subsec. (a).
Subsec. (b)(1)(A).
Subsec. (b)(1)(B).
Subsec. (b)(2)(C).
1980—Subsec. (b)(1)(A).
Subsec. (c)(1).
1978—Subsec. (b)(1)(A).
Subsec. (b)(2).
Subsec. (b).
Subsec. (c)(1).
1976—Subsec. (a)(3).
Subsec. (b)(1)(B).
Subsec. (b)(2).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2003 Amendment
Amendment by
Effective Date of 2001 Amendments
Amendment by
Amendment by section 401(a)(2), (g)(2)(D) of
Amendment by section 402(a)(4)(A) of
Amendment by section 641(e)(11) of
Effective Date of 1998 Amendment
Amendment by section 6023(18)(A) of
Amendment by sections 6004(d)(10) and 6005(b)(8) of
Effective Date of 1997 Amendments
Amendment by section 213(d) of
Amendment by section 302(b) of
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1102(b)(1) of
Amendment by section 1848(f) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by section 311(h)(7), (9), (10) of
Amendment by section 313(b)(2) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Amendment by section 156(c)(3), (5) of
Amendment by section 157(b)(3) of
Effective Date of 1976 Amendment
Amendment by section 1501(b)(8) of
Amendment by section 1904(a)(22) of
Effective Date
Plan Amendments Not Required Until January 1, 1994
For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4974. Excise tax on certain accumulations in qualified retirement plans
(a) General rule
If the amount distributed during the taxable year of the payee under any qualified retirement plan or any eligible deferred compensation plan (as defined in section 457(b)) is less than the minimum required distribution for such taxable year, there is hereby imposed a tax equal to 25 percent of the amount by which such minimum required distribution exceeds the actual amount distributed during the taxable year. The tax imposed by this section shall be paid by the payee.
(b) Minimum required distribution
For purposes of this section, the term "minimum required distribution" means the minimum amount required to be distributed during a taxable year under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), as the case may be, as determined under regulations prescribed by the Secretary.
(c) Qualified retirement plan
For purposes of this section, the term "qualified retirement plan" means—
(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),
(2) an annuity plan described in section 403(a),
(3) an annuity contract described in section 403(b),
(4) an individual retirement account described in section 408(a), or
(5) an individual retirement annuity described in section 408(b).
Such term includes any plan, contract, account, or annuity which, at any time, has been determined by the Secretary to be such a plan, contract, account, or annuity.
(d) Waiver of tax in certain cases
If the taxpayer establishes to the satisfaction of the Secretary that—
(1) the shortfall described in subsection (a) in the amount distributed during any taxable year was due to reasonable error, and
(2) reasonable steps are being taken to remedy the shortfall,
the Secretary may waive the tax imposed by subsection (a) for the taxable year.
(e) Reduction of tax in certain cases
(1) Reduction
In the case of a taxpayer who—
(A) receives a distribution, during the correction window, of the amount which resulted in imposition of a tax under subsection (a) from the same plan to which such tax relates, and
(B) submits a return, during the correction window, reflecting such tax (as modified by this subsection),
the first sentence of subsection (a) shall be applied by substituting "10 percent" for "25 percent".
(2) Correction window
For purposes of this subsection, the term "correction window" means the period of time beginning on the date on which the tax under subsection (a) is imposed with respect to a shortfall of distributions from a plan described in subsection (a), and ending on the earliest of—
(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212,
(B) the date on which the tax imposed by subsection (a) is assessed, or
(C) the last day of the second taxable year that begins after the end of the taxable year in which the tax under subsection (a) is imposed.
(Added
Editorial Notes
Amendments
2022—Subsec. (a).
Subsec. (e).
1986—
Subsec. (a).
Subsec. (b).
1978—Subsec. (c).
1976—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 1986 Amendment
Amendment by section 1121(a)(1) of
Amendment by section 1852(a)(7)(B), (C) of
Effective Date of 1978 Amendment
Effective Date
Section effective Jan. 1, 1975, see section 2002(i)(2) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4975. Tax on prohibited transactions
(a) Initial taxes on disqualified person
There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such).
(b) Additional taxes on disqualified person
In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such).
(c) Prohibited transaction
(1) General rule
For purposes of this section, the term "prohibited transaction" means any direct or indirect—
(A) sale or exchange, or leasing, of any property between a plan and a disqualified person;
(B) lending of money or other extension of credit between a plan and a disqualified person;
(C) furnishing of goods, services, or facilities between a plan and a disqualified person;
(D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan;
(E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or
(F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.
(2) Special exemption
The Secretary shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any disqualified person or transaction, orders of disqualified persons or transactions, from all or part of the restrictions imposed by paragraph (1) of this subsection. Action under this subparagraph may be taken only after consultation and coordination with the Secretary of Labor. The Secretary may not grant an exemption under this paragraph unless he finds that such exemption is—
(A) administratively feasible,
(B) in the interests of the plan and of its participants and beneficiaries, and
(C) protective of the rights of participants and beneficiaries of the plan.
Before granting an exemption under this paragraph, the Secretary shall require adequate notice to be given to interested persons and shall publish notice in the Federal Register of the pendency of such exemption and shall afford interested persons an opportunity to present views. No exemption may be granted under this paragraph with respect to a transaction described in subparagraph (E) or (F) of paragraph (1) unless the Secretary affords an opportunity for a hearing and makes a determination on the record with respect to the findings required under subparagraphs (A), (B), and (C) of this paragraph, except that in lieu of such hearing the Secretary may accept any record made by the Secretary of Labor with respect to an application for exemption under section 408(a) of title I of the Employee Retirement Income Security Act of 1974.
(3) Special rule for individual retirement accounts
An individual for whose benefit an individual retirement account is established and his beneficiaries shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if section 408(e)(4) applies to such account.
(4) Special rule for Archer MSAs
An individual for whose benefit an Archer MSA (within the meaning of section 220(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 220(e)(2) applies to such transaction.
(5) Special rule for Coverdell education savings accounts
An individual for whose benefit a Coverdell education savings account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 530(d) applies with respect to such transaction.
(6) Special rule for health savings accounts
An individual for whose benefit a health savings account (within the meaning of section 223(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a health savings account by reason of the application of section 223(e)(2) to such account.
(7) Special rule for provision of pharmacy benefit services
Any party to an arrangement which satisfies the requirements of section 408(h) of the Employee Retirement Income Security Act of 1974 shall be exempt from the tax imposed by this section with respect to such arrangement.
(d) Exemptions
Except as provided in subsection (f)(6), the prohibitions provided in subsection (c) shall not apply to—
(1) any loan made by the plan to a disqualified person who is a participant or beneficiary of the plan if such loan—
(A) is available to all such participants or beneficiaries on a reasonably equivalent basis,
(B) is not made available to highly compensated employees (within the meaning of section 414(q)) in an amount greater than the amount made available to other employees,
(C) is made in accordance with specific provisions regarding such loans set forth in the plan,
(D) bears a reasonable rate of interest, and
(E) is adequately secured;
(2) any contract, or reasonable arrangement, made with a disqualified person for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor;
(3) any loan to a leveraged employee stock ownership plan (as defined in subsection (e)(7)), if—
(A) such loan is primarily for the benefit of participants and beneficiaries of the plan, and
(B) such loan is at a reasonable rate of interest, and any collateral which is given to a disqualified person by the plan consists only of qualifying employer securities (as defined in subsection (e)(8));
(4) the investment of all or part of a plan's assets in deposits which bear a reasonable interest rate in a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan and if—
(A) the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or
(B) such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliates thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment;
(5) any contract for life insurance, health insurance, or annuities with one or more insurers which are qualified to do business in a State if the plan pays no more than adequate consideration, and if each such insurer or insurers is—
(A) the employer maintaining the plan, or
(B) a disqualified person which is wholly owned (directly or indirectly) by the employer establishing the plan, or by any person which is a disqualified person with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respect to which such insurers are disqualified persons (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan);
(6) the provision of any ancillary service by a bank or similar financial institution supervised by the United States or a State, if such service is provided at not more than reasonable compensation, if such bank or other institution is a fiduciary of such plan, and if—
(A) such bank or similar financial institution has adopted adequate internal safeguards which assure that the provision of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and
(B) the extent to which such ancillary service is provided is subject to specific guidelines issued by such bank or similar financial institution (as determined by the Secretary after consultation with Federal and State supervisory authority), and under such guidelines the bank or similar financial institution does not provide such ancillary service—
(i) in an excessive or unreasonable manner, and
(ii) in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans;
(7) the exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary, but only if the plan receives no less than adequate consideration pursuant to such conversion;
(8) any transaction between a plan and a common or collective trust fund or pooled investment fund maintained by a disqualified person which is a bank or trust company supervised by a State or Federal agency or between a plan and a pooled investment fund of an insurance company qualified to do business in a State if—
(A) the transaction is a sale or purchase of an interest in the fund,
(B) the bank, trust company, or insurance company receives not more than a reasonable compensation, and
(C) such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan;
(9) receipt by a disqualified person of any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries;
(10) receipt by a disqualified person of any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan, but no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan or from an employee organization whose members are participants in such plan shall receive compensation from such fund, except for reimbursement of expenses properly and actually incurred;
(11) service by a disqualified person as a fiduciary in addition to being an officer, employee, agent, or other representative of a disqualified person;
(12) the making by a fiduciary of a distribution of the assets of the trust in accordance with the terms of the plan if such assets are distributed in the same manner as provided under section 4044 of title IV of the Employee Retirement Income Security Act of 1974 (relating to allocation of assets);
(13) any transaction which is exempt from section 406 of such Act by reason of section 408(e) of such Act (or which would be so exempt if such section 406 applied to such transaction) or which is exempt from section 406 of such Act by reason of section 408(b)(12) of such Act;
(14) any transaction required or permitted under part 1 of subtitle E of title IV or section 4223 of the Employee Retirement Income Security Act of 1974, but this paragraph shall not apply with respect to the application of subsection (c)(1) (E) or (F);
(15) a merger of multiemployer plans, or the transfer of assets or liabilities between multiemployer plans, determined by the Pension Benefit Guaranty Corporation to meet the requirements of section 4231 of such Act, but this paragraph shall not apply with respect to the application of subsection (c)(1)(E) or (F);
(16) a sale of stock held by a trust which constitutes an individual retirement account under section 408(a) to the individual for whose benefit such account is established if—
(A) such stock is in a bank (as defined in section 581) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (
(B) such stock is held by such trust as of the date of the enactment of this paragraph,
(C) such sale is pursuant to an election under section 1362(a) by such bank or company,
(D) such sale is for fair market value at the time of sale (as established by an independent appraiser) and the terms of the sale are otherwise at least as favorable to such trust as the terms that would apply on a sale to an unrelated party,
(E) such trust does not pay any commissions, costs, or other expenses in connection with the sale, and
(F) the stock is sold in a single transaction for cash not later than 120 days after the S corporation election is made;
(17) any transaction in connection with the provision of investment advice described in subsection (e)(3)(B) to a participant or beneficiary in a plan that permits such participant or beneficiary to direct the investment of plan assets in an individual account, if—
(A) the transaction is—
(i) the provision of the investment advice to the participant or beneficiary of the plan with respect to a security or other property available as an investment under the plan,
(ii) the acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice, or
(iii) the direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in connection with the provision of the advice or in connection with an acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice; and
(B) the requirements of subsection (f)(8) are met,1
(18) any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary of Labor), between a plan and a disqualified person (other than a fiduciary described in subsection (e)(3)) with respect to a plan if—
(A) the transaction involves a block trade,
(B) at the time of the transaction, the interest of the plan (together with the interests of any other plans maintained by the same plan sponsor), does not exceed 10 percent of the aggregate size of the block trade,
(C) the terms of the transaction, including the price, are at least as favorable to the plan as an arm's length 2 transaction, and
(D) the compensation associated with the purchase and sale is not greater than the compensation associated with an arm's length 2 transaction with an unrelated party,1
(19) any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary of Labor), between a plan and a disqualified person if—
(A) the transaction is executed through an electronic communication network, alternative trading system, or similar execution system or trading venue subject to regulation and oversight by—
(i) the applicable Federal regulating entity, or
(ii) such foreign regulatory entity as the Secretary of Labor may determine by regulation,
(B) either—
(i) the transaction is effected pursuant to rules designed to match purchases and sales at the best price available through the execution system in accordance with applicable rules of the Securities and Exchange Commission or other relevant governmental authority, or
(ii) neither the execution system nor the parties to the transaction take into account the identity of the parties in the execution of trades,
(C) the price and compensation associated with the purchase and sale are not greater than the price and compensation associated with an arm's length 2 transaction with an unrelated party,
(D) if 3 the disqualified person has an ownership interest in the system or venue described in subparagraph (A), the system or venue has been authorized by the plan sponsor or other independent fiduciary for transactions described in this paragraph, and
(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any system or venue described in subparagraph (A), a plan fiduciary is provided written or electronic notice of the execution of such transaction through such system or venue,1
(20) transactions described in subparagraphs (A), (B), and (D) of subsection (c)(1) between a plan and a person that is a disqualified person other than a fiduciary (or an affiliate) who has or exercises any discretionary authority or control with respect to the investment of the plan assets involved in the transaction or renders investment advice (within the meaning of subsection (e)(3)(B)) with respect to those assets, solely by reason of providing services to the plan or solely by reason of a relationship to such a service provider described in subparagraph (F), (G), (H), or (I) of subsection (e)(2), or both, but only if in connection with such transaction the plan receives no less, nor pays no more, than adequate consideration,1
(21) any foreign exchange transactions, between a bank or broker-dealer (or any affiliate of either) and a plan (as defined in this section) with respect to which such bank or broker-dealer (or affiliate) is a trustee, custodian, fiduciary, or other disqualified person, if—
(A) the transaction is in connection with the purchase, holding, or sale of securities or other investment assets (other than a foreign exchange transaction unrelated to any other investment in securities or other investment assets),
(B) at the time the foreign exchange transaction is entered into, the terms of the transaction are not less favorable to the plan than the terms generally available in comparable arm's length 2 foreign exchange transactions between unrelated parties, or the terms afforded by the bank or broker-dealer (or any affiliate of either) in comparable arm's-length foreign exchange transactions involving unrelated parties,
(C) the exchange rate used by such bank or broker-dealer (or affiliate) for a particular foreign exchange transaction does not deviate by more than 3 percent from the interbank bid and asked rates for transactions of comparable size and maturity at the time of the transaction as displayed on an independent service that reports rates of exchange in the foreign currency market for such currency, and
(D) the bank or broker-dealer (or any affiliate of either) does not have investment discretion, or provide investment advice, with respect to the transaction,1
(22) any transaction described in subsection (c)(1)(A) involving the purchase and sale of a security between a plan and any other account managed by the same investment manager, if—
(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available,
(B) the transaction is effected at the independent current market price of the security (within the meaning of section 270.17a–7(b) of title 17, Code of Federal Regulations),
(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant to subparagraph (D)), or other remuneration is paid in connection with the transaction,
(D) a fiduciary (other than the investment manager engaging in the cross-trades or any affiliate) for each plan participating in the transaction authorizes in advance of any cross-trades (in a document that is separate from any other written agreement of the parties) the investment manager to engage in cross trades at the investment manager's discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades may take place (but only if such disclosure is separate from any other agreement or disclosure involving the asset management relationship), including the written policies and procedures of the investment manager described in subparagraph (H),
(E) each plan participating in the transaction has assets of at least $100,000,000, except that if the assets of a plan are invested in a master trust containing the assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7) of the Employee Retirement Income Security Act of 1974), the master trust has assets of at least $100,000,000,
(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph (D) a quarterly report detailing all cross trades executed by the investment manager in which the plan participated during such quarter, including the following information, as applicable: (i) the identity of each security bought or sold; (ii) the number of shares or units traded; (iii) the parties involved in the cross-trade; and (iv) trade price and the method used to establish the trade price,
(G) the investment manager does not base its fee schedule on the plan's consent to cross trading, and no other service (other than the investment opportunities and cost savings available through a cross trade) is conditioned on the plan's consent to cross trading,
(H) the investment manager has adopted, and cross-trades are effected in accordance with, written cross-trading policies and procedures that are fair and equitable to all accounts participating in the cross-trading program, and that include a description of the manager's pricing policies and procedures, and the manager's policies and procedures for allocating cross trades in an objective manner among accounts participating in the cross-trading program, and
(I) the investment manager has designated an individual responsible for periodically reviewing such purchases and sales to ensure compliance with the written policies and procedures described in subparagraph (H), and following such review, the individual shall issue an annual written report no later than 90 days following the period to which it relates signed under penalty of perjury to the plan fiduciary who authorized cross trading under subparagraph (D) describing the steps performed during the course of the review, the level of compliance, and any specific instances of non-compliance.
The written report shall also notify the plan fiduciary of the plan's right to terminate participation in the investment manager's cross-trading program at any time,1
(23) except as provided in subsection (f)(11), a transaction described in subparagraph (A), (B), (C), or (D) of subsection (c)(1) in connection with the acquisition, holding, or disposition of any security or commodity, if the transaction is corrected before the end of the correction period,1
(24) the provision of a de minimis financial incentive described in section 401(k)(4)(A),1 or
(25) the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction.
(e) Definitions
(1) Plan
For purposes of this section, the term "plan" means—
(A) a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), which trust or plan is exempt from tax under section 501(a),
(B) an individual retirement account described in section 408(a),
(C) an individual retirement annuity described in section 408(b),
(D) an Archer MSA described in section 220(d),
(E) a health savings account described in section 223(d),
(F) a Coverdell education savings account described in section 530, or
(G) a trust, plan, account, or annuity which, at any time, has been determined by the Secretary to be described in any preceding subparagraph of this paragraph.
(2) Disqualified person
For purposes of this section, the term "disqualified person" means a person who is—
(A) a fiduciary;
(B) a person providing services to the plan;
(C) an employer any of whose employees are covered by the plan;
(D) an employee organization any of whose members are covered by the plan;
(E) an owner, direct or indirect, of 50 percent or more of—
(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation,
(ii) the capital interest or the profits interest of a partnership, or
(iii) the beneficial interest of a trust or unincorporated enterprise,
which is an employer or an employee organization described in subparagraph (C) or (D);
(F) a member of the family (as defined in paragraph (6)) of any individual described in subparagraph (A), (B), (C), or (E);
(G) a corporation, partnership, or trust or estate of which (or in which) 50 percent or more of—
(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation,
(ii) the capital interest or profits interest of such partnership, or
(iii) the beneficial interest of such trust or estate,
is owned directly or indirectly, or held by persons described in subparagraph (A), (B), (C), (D), or (E);
(H) an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G); or
(I) a 10 percent or more (in capital or profits) partner or joint venturer of a person described in subparagraph (C), (D), (E), or (G).
The Secretary, after consultation and coordination with the Secretary of Labor or his delegate, may by regulation prescribe a percentage lower than 50 percent for subparagraphs (E) and (G) and lower than 10 percent for subparagraphs (H) and (I).
(3) Fiduciary
For purposes of this section, the term "fiduciary" means any person who—
(A) exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,
(B) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or
(C) has any discretionary authority or discretionary responsibility in the administration of such plan.
Such term includes any person designated under section 405(c)(1)(B) of the Employee Retirement Income Security Act of 1974.
(4) Stockholdings
For purposes of paragraphs (2)(E)(i) and (G)(i) there shall be taken into account indirect stockholdings 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 paragraph (6).
(5) Partnerships; trusts
For purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) 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 paragraph (6).
(6) Member of family
For purposes of paragraph (2)(F), the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant.
(7) Employee stock ownership plan
The term "employee stock ownership plan" means a defined contribution plan—
(A) which is a stock bonus plan which is qualified, or a stock bonus and a money purchase plan both of which are qualified under section 401(a), and which are designed to invest primarily in qualifying employer securities; and
(B) which is otherwise defined in regulations prescribed by the Secretary.
A plan shall not be treated as an employee stock ownership plan unless it meets the requirements of section 409(h), section 409(o), and, if applicable, section 409(n), section 409(p), and section 664(g) and, if the employer has a registration-type class of securities (as defined in section 409(e)(4)), it meets the requirements of section 409(e).
(8) Qualifying employer security
The term "qualifying employer security" means any employer security within the meaning of section 409(l). If any moneys or other property of a plan are invested in shares of an investment company registered under the Investment Company Act of 1940, the investment shall not cause that investment company or that investment company's investment adviser or principal underwriter to be treated as a fiduciary or a disqualified person for purposes of this section, except when an investment company or its investment adviser or principal underwriter acts in connection with a plan covering employees of the investment company, its investment adviser, or its principal underwriter.
(9) Section made applicable to withdrawal liability payment funds
For purposes of this section—
(A) In general
The term "plan" includes a trust described in section 501(c)(22).
(B) Disqualified person
In the case of any trust to which this section applies by reason of subparagraph (A), the term "disqualified person" includes any person who is a disqualified person with respect to any plan to which such trust is permitted to make payments under section 4223 of the Employee Retirement Income Security Act of 1974.
(f) Other definitions and special rules
For purposes of this section—
(1) Joint and several liability
If more than one person is liable under subsection (a) or (b) with respect to any one prohibited transaction, all such persons shall be jointly and severally liable under such subsection with respect to such transaction.
(2) Taxable period
The term "taxable period" means, with respect to any prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending on the earliest of—
(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212,
(B) the date on which the tax imposed by subsection (a) is assessed, or
(C) the date on which correction of the prohibited transaction is completed.
(3) Sale or exchange; encumbered property
A transfer or real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan 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.
(4) Amount involved
The term "amount involved" means, with respect to a prohibited transaction, 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 paragraphs (2) and (10) of subsection (d) 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 tax imposed by subsection (a), shall be determined as of the date on which the prohibited transaction occurs; and
(B) in the case of the tax imposed by subsection (b), shall be the highest fair market value during the taxable period.
(5) Correction
The terms "correction" and "correct" mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards.
(6) Exemptions not to apply to certain transactions
(A) In general
In the case of a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)), the exemptions provided by subsection (d) (other than paragraphs (9) and (12)) shall not apply to a transaction in which the plan directly or indirectly—
(i) lends any part of the corpus or income of the plan to,
(ii) pays any compensation for personal services rendered to the plan to, or
(iii) acquires for the plan any property from, or sells any property to,
any such owner-employee, a member of the family (as defined in section 267(c)(4)) of any such owner-employee, or any corporation in which any such owner-employee owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation.
(B) Special rules for shareholder-employees, etc.
(i) In general
For purposes of subparagraph (A), the following shall be treated as owner-employees:
(I) A shareholder-employee.
(II) A participant or beneficiary of an individual retirement plan (as defined in section 7701(a)(37)).
(III) An employer or association of employees which establishes such an individual retirement plan under section 408(c).
(ii) Exception for certain transactions involving shareholder-employees
Subparagraph (A)(iii) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in subsection (e)(7)) by a shareholder-employee, a member of the family (as defined in section 267(c)(4)) of such shareholder-employee, or a corporation in which such a shareholder-employee owns stock representing a 50 percent or greater interest described in subparagraph (A).
(iii) Loan exception
For purposes of subparagraph (A)(i), the term "owner-employee" shall only include a person described in subclause (II) or (III) of clause (i).
(C) Shareholder-employee
For purposes of subparagraph (B), the term "shareholder-employee" means an employee or officer of an S corporation who owns (or is considered as owning within the meaning of section 318(a)(1)) more than 5 percent of the outstanding stock of the corporation on any day during the taxable year of such corporation.
(7) S corporation repayment of loans for qualifying employer securities
A plan shall not be treated as violating the requirements of section 401 or 409 or subsection (e)(7), or as engaging in a prohibited transaction for purposes of subsection (d)(3), merely by reason of any distribution (as described in section 1368(a)) with respect to S corporation stock that constitutes qualifying employer securities, which in accordance with the plan provisions is used to make payments on a loan described in subsection (d)(3) the proceeds of which were used to acquire such qualifying employer securities (whether or not allocated to participants). The preceding sentence shall not apply in the case of a distribution which is paid with respect to any employer security which is allocated to a participant unless the plan provides that employer securities with a fair market value of not less than the amount of such distribution are allocated to such participant for the year which (but for the preceding sentence) such distribution would have been allocated to such participant.
(8) Provision of investment advice to participant and beneficiaries
(A) In general
The prohibitions provided in subsection (c) shall not apply to transactions described in subsection (d)(17) if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement.
(B) Eligible investment advice arrangement
For purposes of this paragraph, the term "eligible investment advice arrangement" means an arrangement—
(i) which either—
(I) provides that any fees (including any commission or other compensation) received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for purposes of investment of plan assets do not vary depending on the basis of any investment option selected, or
(II) uses a computer model under an investment advice program meeting the requirements of subparagraph (C) in connection with the provision of investment advice by a fiduciary adviser to a participant or beneficiary, and
(ii) with respect to which the requirements of subparagraphs (D), (E), (F), (G), (H), and (I) are met.
(C) Investment advice program using computer model
(i) In general
An investment advice program meets the requirements of this subparagraph if the requirements of clauses (ii), (iii), and (iv) are met.
(ii) Computer model
The requirements of this clause are met if the investment advice provided under the investment advice program is provided pursuant to a computer model that—
(I) applies generally accepted investment theories that take into account the historic returns of different asset classes over defined periods of time,
(II) utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments,
(III) utilizes prescribed objective criteria to provide asset allocation portfolios comprised of investment options available under the plan,
(IV) operates in a manner that is not biased in favor of investments offered by the fiduciary adviser or a person with a material affiliation or contractual relationship with the fiduciary adviser, and
(V) takes into account all investment options under the plan in specifying how a participant's account balance should be invested and is not inappropriately weighted with respect to any investment option.
(iii) Certification
(I) In general
The requirements of this clause are met with respect to any investment advice program if an eligible investment expert certifies, prior to the utilization of the computer model and in accordance with rules prescribed by the Secretary of Labor, that the computer model meets the requirements of clause (ii).
(II) Renewal of certifications
If, as determined under regulations prescribed by the Secretary of Labor, there are material modifications to a computer model, the requirements of this clause are met only if a certification described in subclause (I) is obtained with respect to the computer model as so modified.
(III) Eligible investment expert
The term "eligible investment expert" means any person which meets such requirements as the Secretary of Labor may provide and which does not bear any material affiliation or contractual relationship with any investment adviser or a related person thereof (or any employee, agent, or registered representative of the investment adviser or related person).
(iv) Exclusivity of recommendation
The requirements of this clause are met with respect to any investment advice program if—
(I) the only investment advice provided under the program is the advice generated by the computer model described in clause (ii), and
(II) any transaction described in subsection (d)(17)(A)(ii) occurs solely at the direction of the participant or beneficiary.
Nothing in the preceding sentence shall preclude the participant or beneficiary from requesting investment advice other than that described in clause (i), but only if such request has not been solicited by any person connected with carrying out the arrangement.
(D) Express authorization by separate fiduciary
The requirements of this subparagraph are met with respect to an arrangement if the arrangement is expressly authorized by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either.
(E) Audits
(i) In general
The requirements of this subparagraph are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents in writing—
(I) conducts an annual audit of the arrangement for compliance with the requirements of this paragraph, and
(II) following completion of the annual audit, issues a written report to the fiduciary who authorized use of the arrangement which presents its specific findings regarding compliance of the arrangement with the requirements of this paragraph.
(ii) Special rule for individual retirement and similar plans
In the case of a plan described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of subsection (e)(1), in lieu of the requirements of clause (i), audits of the arrangement shall be conducted at such times and in such manner as the Secretary of Labor may prescribe.
(iii) Independent auditor
For purposes of this subparagraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing investment options under the plan.
(F) Disclosure
The requirements of this subparagraph are met if—
(i) the fiduciary adviser provides to a participant or a beneficiary before the initial provision of the investment advice with regard to any security or other property offered as an investment option, a written notification (which may consist of notification by means of electronic communication)—
(I) of the role of any party that has a material affiliation or contractual relationship with the fiduciary adviser in the development of the investment advice program and in the selection of investment options available under the plan,
(II) of the past performance and historical rates of return of the investment options available under the plan,
(III) of all fees or other compensation relating to the advice that the fiduciary adviser or any affiliate thereof is to receive (including compensation provided by any third party) in connection with the provision of the advice or in connection with the sale, acquisition, or holding of the security or other property,
(IV) of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in the security or other property,
(V) of the manner, and under what circumstances, any participant or beneficiary information provided under the arrangement will be used or disclosed,
(VI) of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser,
(VII) that the adviser is acting as a fiduciary of the plan in connection with the provision of the advice, and
(VIII) that a recipient of the advice may separately arrange for the provision of advice by another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and
(ii) at all times during the provision of advisory services to the participant or beneficiary, the fiduciary adviser—
(I) maintains the information described in clause (i) in accurate form and in the manner described in subparagraph (H),
(II) provides, without charge, accurate information to the recipient of the advice no less frequently than annually,
(III) provides, without charge, accurate information to the recipient of the advice upon request of the recipient, and
(IV) provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided to the recipient of the advice at a time reasonably contemporaneous to the change in information.
(G) Other conditions
The requirements of this subparagraph are met if—
(i) the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding of the security or other property, in accordance with all applicable securities laws,
(ii) the sale, acquisition, or holding occurs solely at the direction of the recipient of the advice,
(iii) the compensation received by the fiduciary adviser and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and
(iv) the terms of the sale, acquisition, or holding of the security or other property are at least as favorable to the plan as an arm's length 2 transaction would be.
(H) Standards for presentation of information
(i) In general
The requirements of this subparagraph are met if the notification required to be provided to participants and beneficiaries under subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the information required to be provided in the notification.
(ii) Model form for disclosure of fees and other compensation
The Secretary of Labor shall issue a model form for the disclosure of fees and other compensation required in subparagraph (F)(i)(III) which meets the requirements of clause (i).
(I) Maintenance for 6 years of evidence of compliance
The requirements of this subparagraph are met if a fiduciary adviser who has provided advice referred to in subparagraph (A) maintains, for a period of not less than 6 years after the provision of the advice, any records necessary for determining whether the requirements of the preceding provisions of this paragraph and of subsection (d)(17) have been met. A transaction prohibited under subsection (c) shall not be considered to have occurred solely because the records are lost or destroyed prior to the end of the 6-year period due to circumstances beyond the control of the fiduciary adviser.
(J) Definitions
For purposes of this paragraph and subsection (d)(17)—
(i) Fiduciary adviser
The term "fiduciary adviser" means, with respect to a plan, a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) by the person to a participant or beneficiary of the plan and who is—
(I) registered as an investment adviser under the Investment Advisers Act of 1940 (
(II) a bank or similar financial institution referred to in subsection (d)(4) or a savings association (as defined in section 3(b)(1) of the Federal Deposit Insurance Act (
(III) an insurance company qualified to do business under the laws of a State,
(IV) a person registered as a broker or dealer under the Securities Exchange Act of 1934 (
(V) an affiliate of a person described in any of subclauses (I) through (IV), or
(VI) an employee, agent, or registered representative of a person described in subclauses (I) through (V) who satisfies the requirements of applicable insurance, banking, and securities laws relating to the provision of the advice.
For purposes of this title, a person who develops the computer model described in subparagraph (C)(ii) or markets the investment advice program or computer model shall be treated as a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) to a participant or beneficiary and shall be treated as a fiduciary adviser for purposes of this paragraph and subsection (d)(17), except that the Secretary of Labor may prescribe rules under which only 1 fiduciary adviser may elect to be treated as a fiduciary with respect to the plan.
(ii) Affiliate
The term "affiliate" of another entity means an affiliated person of the entity (as defined in section 2(a)(3) of the Investment Company Act of 1940 (
(iii) Registered representative
The term "registered representative" of another entity means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (
(9) Block trade
The term "block trade" means any trade of at least 10,000 shares or with a market value of at least $200,000 which will be allocated across two or more unrelated client accounts of a fiduciary.
(10) Adequate consideration
The term "adequate consideration" means—
(A) in the case of a security for which there is a generally recognized market—
(i) the price of the security prevailing on a national securities exchange which is registered under section 6 of the Securities Exchange Act of 1934, taking into account factors such as the size of the transaction and marketability of the security, or
(ii) if the security is not traded on such a national securities exchange, a price not less favorable to the plan than the offering price for the security as established by the current bid and asked prices quoted by persons independent of the issuer and of the party in interest, taking into account factors such as the size of the transaction and marketability of the security, and
(B) in the case of an asset other than a security for which there is a generally recognized market, the fair market value of the asset as determined in good faith by a fiduciary or fiduciaries in accordance with regulations prescribed by the Secretary of Labor.
(11) Correction period
(A) In general
For purposes of subsection (d)(23), the term "correction period" means the 14-day period beginning on the date on which the disqualified person discovers, or reasonably should have discovered, that the transaction would (without regard to this paragraph and subsection (d)(23)) constitute a prohibited transaction.
(B) Exceptions
(i) Employer securities
Subsection (d)(23) does not apply to any transaction between a plan and a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in section 407(d)(1) of the Employee Retirement Income Security Act of 1974) or the acquisition, sale, or lease of employer real property (as defined in section 407(d)(2) of such Act).
(ii) Knowing prohibited transaction
In the case of any disqualified person, subsection (d)(23) does not apply to a transaction if, at the time the transaction is entered into, the disqualified person knew (or reasonably should have known) that the transaction would (without regard to this paragraph) constitute a prohibited transaction.
(C) Abatement of tax where there is a correction
If a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under subsections (a) and (b) shall be assessed with respect to such transaction, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment.
(D) Definitions
For purposes of this paragraph and subsection (d)(23)—
(i) Security
The term "security" has the meaning given such term by section 475(c)(2) (without regard to subparagraph (F)(iii) and the last sentence thereof).
(ii) Commodity
The term "commodity" has the meaning given such term by section 475(e)(2) (without regard to subparagraph (D)(iii) thereof).
(iii) Correct
The term "correct" means, with respect to a transaction—
(I) to undo the transaction to the extent possible and in any case to make good to the plan or affected account any losses resulting from the transaction, and
(II) to restore to the plan or affected account any profits made through the use of assets of the plan.
(12) Rules relating to automatic portability transactions
(A) In general
For purposes of subsection (d)(25)—
(i) Automatic portability transaction
An automatic portability transaction is a transfer of assets made—
(I) from an individual retirement plan which is established on behalf of an individual and to which amounts were transferred under section 401(a)(31)(B)(i),
(II) to an employer-sponsored retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) (other than a defined benefit plan) in which such individual is an active participant, and
(III) after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer.
(ii) Automatic portability provider
An automatic portability provider is a person, other than an individual, who executes transfers described in clause (i).
(B) Conditions for automatic portability transactions
Subsection (d)(25) shall not apply to an automatic portability transaction unless the following requirements are satisfied:
(i) Acknowledgment of fiduciary status
An automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary of Labor, that the provider is a fiduciary with respect to the individual retirement plan described in subparagraph (A)(i)(I).
(ii) Fees
The fees and compensation received, directly or indirectly, by the automatic portability provider for services provided in connection with the automatic portability transaction (including any increase in such fees or compensation and any fees or compensation in connection with, but received before, the transaction)—
(I) shall not exceed reasonable compensation, and
(II) shall be fully disclosed to and approved in writing in advance of the transaction by a plan fiduciary of the plan described in subparagraph (A)(i)(II) which is independent of the automatic portability provider.
An automatic portability provider shall not receive any fees or compensation in connection with an automatic portability transaction involving a plan which is sponsored or maintained by the automatic portability provider.
(iii) Data usage
The automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I) or to the participants of the plan described in subparagraph (A)(i)(II).
(iv) Open participation
The automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II).
(v) Pre-transaction notice
At least 60 days in advance of an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established which includes—
(I) a description of the automatic portability transaction and a complete and accurate statement of all fees which will be charged and all compensation which will be received in connection with the transaction,
(II) a clear and prominent description of the individual's right to affirmatively elect not to participate in the transaction as well as the other available distribution options, the deadline by which the individual must make an election, the procedures for such an election, and a telephone number for the automatic portability provider that the individual may call to make such election,
(III) a description of the individual's right to designate a beneficiary and the procedures to do so, and
(IV) such other disclosures as the Secretary of Labor may require by regulation.
(vi) Post-transaction notice
Not later than 3 business days after an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established of—
(I) the actions taken by the automatic portability provider with respect to the individual's account,
(II) all relevant information regarding the location and amount of any transferred assets,
(III) a statement of fees charged against the account by the automatic portability provider or its affiliates in connection with the transfer,
(IV) a telephone number at which the individual can contact the automatic portability provider, and
(V) such other disclosures as the Secretary of Labor may require by regulation.
(vii) Notice requirements
The notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average person and shall not include inaccurate or misleading statements.
(viii) Frequency of searches
The automatic portability provider shall query on at least a monthly basis whether any individual with an individual retirement plan described in subparagraph (A)(i)(I) has an account in a plan described in subparagraph (A)(i)(II).
(ix) Timeliness of execution
After liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II).
(x) Limitation on exercise of discretion
The automatic portability provider shall neither have nor exercise discretion to affect the timing or amount of the transfer pursuant to an automatic portability transaction other than to deduct the appropriate fees as described in clause (ii).
(xi) Record retention and audits
(I) In general
An automatic portability provider shall, for not less than 6 years after the automatic portability transaction has occurred, maintain the records sufficient to demonstrate the terms of this subparagraph have been met. The automatic portability provider shall make such records available to any authorized employee of the Department of the Treasury or the Department of Labor within 30 calendar days of the date of a written request for such records.
(II) Audits
An automatic portability provider shall conduct an annual audit, in accordance with regulations promulgated by the Secretary of Labor, of automatic portability transactions occurring during the calendar year to demonstrate compliance with this paragraph and any regulations thereunder and identify any instances of noncompliance therewith, and shall submit such audit annually to the Secretary of Labor, in such form and manner as specified by such Secretary.
(xii) Website
The automatic portability provider shall maintain a website which contains—
(I) a list of recordkeepers for each plan described in subparagraph (A)(i)(II) with respect to which the provider carries out automatic portability transactions, and
(II) a list of all fees described in clause (ii)(II) paid to the provider.
(g) Application of section
This section shall not apply—
(1) in the case of a plan to which a guaranteed benefit policy (as defined in section 401(b)(2)(B) of the Employee Retirement Income Security Act of 1974) is issued, to any assets of the insurance company, insurance service, or insurance organization merely because of its issuance of such policy;
(2) to a governmental plan (within the meaning of section 414(d)); or
(3) to a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made.
In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, by reason of such investment, be deemed to include any assets of such company.
(h) Notification of Secretary of Labor
Before sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax.
(i) Cross reference
For provisions concerning coordination procedures between Secretary of Labor and Secretary of the Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974.
(Added
Editorial Notes
References in Text
The Employee Retirement Income Security Act of 1974, referred to in text, is
The date of the enactment of this paragraph, referred to in subsec. (d)(16)(B), is the date of enactment of
The Investment Company Act of 1940, referred to in subsecs. (e)(8) and (g), is title I of act Aug. 22, 1940, ch. 686,
The Investment Advisers Act of 1940, referred to in subsec. (f)(8)(J)(i)(I), is title II of act Aug. 22, 1940, ch. 686,
The Securities Exchange Act of 1934, referred to in subsec. (f)(8)(J)(i)(IV), (10)(A)(i), is act June 6, 1934, ch. 404,
Amendments
2022—Subsec. (d)(24).
Subsec. (d)(25).
Subsec. (f)(12).
2019—Subsec. (c)(7).
2018—Subsec. (d)(3).
Subsec. (d)(16)(A).
Subsec. (d)(17).
Subsec. (d)(21).
Subsec. (f)(8)(C)(iv)(II).
Subsec. (f)(8)(F)(i)(I).
Subsec. (f)(8)(F)(i)(V).
2008—Subsec. (d)(17).
Subsec. (d)(18).
Subsec. (d)(19) to (21).
Subsec. (d)(21)(C).
Subsec. (f)(8)(A).
Subsec. (f)(8)(C)(iv)(II).
Subsec. (f)(8)(F)(i)(I).
Subsec. (f)(8)(I).
Subsec. (f)(8)(J)(i).
Subsec. (f)(11)(B)(i).
2006—Subsec. (d)(17).
Subsec. (d)(18).
Subsec. (d)(19).
Subsec. (d)(20).
Subsec. (d)(21).
Subsec. (d)(22).
Subsec. (d)(23).
Subsec. (f)(8).
Subsec. (f)(9).
Subsec. (f)(10).
Subsec. (f)(11).
2005—Subsec. (d)(16)(A).
Subsec. (d)(16)(C).
2004—Subsec. (d)(16).
Subsec. (f)(7).
2003—Subsec. (c)(6).
Subsec. (e)(1)(E) to (G).
2001—Subsec. (c)(5).
Subsec. (e)(1)(E).
Subsec. (e)(7).
Subsec. (f)(6)(B)(iii).
2000—Subsec. (c)(4).
Subsec. (e)(1)(D).
1998—Subsec. (c)(3).
Subsec. (i).
1997—Subsec. (a).
Subsec. (c)(4).
Subsec. (c)(5).
Subsec. (d).
Subsec. (e)(1)(D) to (F).
Subsec. (e)(7).
Subsec. (f)(6).
1996—Subsec. (a).
Subsec. (c)(4).
Subsec. (d)(13).
Subsec. (e)(1).
1990—Subsec. (d)(13).
1986—Subsec. (d).
Subsec. (d)(1)(B).
Subsec. (e)(7).
1984—Subsec. (d).
Subsec. (e)(1).
Subsec. (e)(7).
Subsec. (e)(8).
1983—Subsec. (d).
1980—Subsec. (b).
Subsec. (d)(14), (15).
Subsec. (e)(7).
Subsec. (e)(8).
Subsec. (e)(9).
Subsec. (f)(2)(B), (C).
Subsec. (f)(4)(B).
Subsec. (f)(6).
1978—Subsec. (d)(3).
Subsec. (e)(7).
1976—Subsecs. (c) to (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 113(c) of
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
"(1)
"(2)
Effective Date of 2005 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by section 233(c) of
Effective Date of 2003 Amendment
Amendment by
Effective Date of 2001 Amendment
Amendment by
Amendment by section 656(b) of
Effective Date of 1997 Amendment
Amendment by section 213(b) of
Amendment by section 1506(b)(1) of
Amendment by section 1530(c)(10) of
Amendment by section 1602(a)(5) of
Effective Date of 1996 Amendments
Amendment by
Amendment by section 1702(g)(3) of
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1114(b)(15)(A) of
Amendment by section 1854(f)(3)(A) of
Effective Date of 1984 Amendment
Amendment by section 491(d)(45), (46) of
Amendment by section 491(e)(7), (8) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1980 Amendments
For effective date of amendment by
Amendment by section 208(b) of
Amendment by section 209(b) of
Amendment by section 101(a)(7)(K), (L)(iv)(III), (v)(XI) of
Effective Date of 1978 Amendment
"(1) insofar as they make the requirements of subsections (e) and (h)(1)(B) of section 409A [now section 409] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applicable to section 4975 of such Code, to stock acquired after December 31, 1979, and
"(2) insofar as they make paragraphs (1)(A) and (2) of section 409A(h) [now section 409(h)] of such Code applicable to such section 4975, to distributions after December 31, 1978."
Effective Date; Savings Provision
"(1)(A) The amendments made by this section [enacting this section and amending
"(B) If, before the amendments made by this section [enacting this section and amending
"(2) Section 4975 of the Internal Revenue Code of 1986 (relating to tax on prohibited transactions) shall not apply to—
"(A) a loan of money or other extension of credit between a plan and a disqualified person under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such loan or other extension of credit remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law);
"(B) a lease of joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law;
"(C) the sale, exchange, or other disposition of property described in subparagraph (B) between a plan and a disqualified person before June 30, 1984, if—
"(i) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and
"(ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition:
"(D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or
"(E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a)(2)(A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act of 1974 [
For the purposes of this paragraph, the term 'disqualified person' has the meaning provided by section 4975(e)(2) of the Internal Revenue Code of 1986."
Regulatory Authority
"(1) require an automatic portability provider to provide a notice to individuals on whose behalf the individual retirement plan described in paragraph (12)(A)(i)(I) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, is established in advance of the notices specified in paragraph (12)(B)(v) of such section, as so added,
"(2) require an automatic portability provider to disclose to plans described in paragraph (12)(A)(i)(II) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, information required to be provided by a covered service provider pursuant to section 2550.408b–2(c) of title 29, Code of Federal Regulations,
"(3) require a plan described in such paragraph (12)(A)(i)(II), as so added, to fully disclose fees related to an automatic portability transaction in its summary plan description or summary of material modifications, as relevant,
"(4) require a plan described in such paragraph, as so added, to invest amounts received on behalf of a participant pursuant to an automatic portability transaction in the participant's current investment election under the plan or, if no election is made or permitted, in the plan's qualified default investment alternative (within the meaning of section 2550.404c–5 of title 29, Code of Federal Regulations) or another investment selected by a fiduciary with respect to such plan,
"(5) prohibit or restrict the receipt or payment of third party compensation (other than a direct fee paid by a plan sponsor which is in lieu of a fee imposed on an individual retirement plan owner) by an automatic portability provider in connection with an automatic portability transaction,
"(6) prohibit exculpatory provisions in an automatic portability provider's contracts or communications with individuals disclaiming or limiting its liability in the event that an automatic portability transaction results in an improper transfer,
"(7) require an automatic portability provider to take actions necessary to reasonably ensure that participant and beneficiary data is current and accurate,
"(8) limit the use of data related to automatic portability transactions for any purpose other than the execution of such transactions or locating missing participants, except as permitted by the Secretary of Labor,
"(9) provide for corrections procedures in the event an auditor determines the automatic portability provider was not in compliance with this provision and related regulations as specified in paragraph (12)(B)(ix)(II) [probably should be "(12)(B)(xi)(II)"] of section 4975(f) of such Code, as so added, including deadlines, supplemental audits, and corrective actions which may include a temporary prohibition from relying on the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section,
"(10) ensure that the appropriate participants and beneficiaries, in fact, receive all the required notices and disclosures, and
"(11) make clear that the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, applies solely to the automatic portability transactions described therein, and, to the extent the Secretary deems necessary or advisable, specify how the application of the exemption relates to or coordinates with the application of other statutory provisions, regulations, administrative guidance, or exemptions.
Any term used in this subsection which is used in paragraph (12) of section 4975(f) of such Code, as added by this section, has the same meaning as when used in such paragraph."
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Applicability of Amendments by Pub. L. 116–94
Report to Congress
"(1)
"(A) the effectiveness of automatic portability transactions under the exemption provided by paragraph (25) of section 4975(d) of the Internal Revenue Code of 1986, as added by this section, detailing—
"(i) the number of automatic cash outs from qualified plans to individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code,
"(ii) the number of completed automatic portability transactions to employer-sponsored retirement plans described in section 4975(f)(12)(A)(i)(II) of such Code,
"(iii) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code which have been transferred to designated beneficiaries,
"(iv) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code for which the automatic portability provider is searching for next of kin due to a deceased account holder without a designated beneficiary, and
"(v) the number of accounts that were reduced to a zero balance while in the automatic portability provider's custody;
"(B) a summary of any consumer complaints submitted to the Employee Benefits Security Administration regarding automatic portability transactions;
"(C) a summary of compliance issues found in the annual audit described in section 4975(f)(12)(B)(xiii)(II) [probably should be "4975(f)(12)(B)(xi)(II)"] of such Code, if any, and their corrections;
"(D) a summary of the fees individuals are charged in connection with automatic portability transactions, including whether those fees have increased since the last report;
"(E) recommendations of any necessary statutory changes to this exemption to improve the effectiveness of automatic portability transactions, including repeal of this provision in the event of a pattern of noncompliance; and
"(F) any other information the Secretary of Labor deems important.
The report required by this subsection shall be made publicly available.
"(2)
Determination of Feasibility of Application of Computer Model Investment Advice Programs for Individual Retirement and Similar Plans
"(A)
"(i) solicit information as to the feasibility of the application of computer model investment advice programs for plans described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of section 4975(e)(1) of the Internal Revenue Code of 1986, including soliciting information from—
"(I) at least the top 50 trustees of such plans, determined on the basis of assets held by such trustees, and
"(II) other persons offering computer model investment advice programs based on nonproprietary products, and
"(ii) shall on the basis of such information make the determination under subparagraph (B).
The information solicited by the Secretary of Labor under clause (i) from persons described in subclauses (I) and (II) of clause (i) shall include information on computer modeling capabilities of such persons with respect to the current year and preceding year, including such capabilities for investment accounts maintained by such persons.
"(B)
"(i) utilizes relevant information about the account beneficiary, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments,
"(ii) takes into account the full range of investments, including equities and bonds, in determining the options for the investment portfolio of the account beneficiary, and
"(iii) allows the account beneficiary, in directing the investment of assets, sufficient flexibility in obtaining advice to evaluate and select investment options.
The Secretary of Labor shall report the results of such determination to the committees of Congress referred to in subparagraph (D)(ii) not later than December 31, 2007.
"(C)
"(i)
"(I)
"(II)
"(ii)
"(I) ensure the requirements of sections 4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code of 1986 are met, and
"(II) ensure the investment advice provided under the investment advice program utilizes prescribed objective criteria to provide asset allocation portfolios comprised of securities or other property available as investments under the plan.
If the Secretary of Labor solicits any information under subparagraph (A) from a person and such person does not provide such information within 60 days after the solicitation, then, unless such failure was due to reasonable cause and not wilful neglect, such person shall not be entitled to utilize the class exemption under this clause.
"(D)
"(i)
"(I) the date which is 2 years after such subsequent determination, or
"(II) the date which is 3 years after the first date on which such exemption took effect.
"(ii)
"(E)
Coordination of 2006 Amendment With Existing Exemptions
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Intent of Congress Concerning Employee Stock Ownership Plans
1 So in original. The comma probably should be a semicolon.
2 So in original. Probably should be "arm's-length".
3 So in original. The word "if" probably should not appear.
§4976. Taxes with respect to funded welfare benefit plans
(a) General rule
If—
(1) an employer maintains a welfare benefit fund, and
(2) there is a disqualified benefit provided during any taxable year,
there is hereby imposed on such employer a tax equal to 100 percent of such disqualified benefit.
(b) Disqualified benefit
For purposes of subsection (a)—
(1) In general
The term "disqualified benefit" means—
(A) any post-retirement medical benefit or life insurance benefit provided with respect to a key employee if a separate account is required to be established for such employee under section 419A(d) and such payment is not from such account,
(B) any post-retirement medical benefit or life insurance benefit provided with respect to an individual in whose favor discrimination is prohibited unless the plan meets the requirements of section 505(b) with respect to such benefit (whether or not such requirements apply to such plan), and
(C) any portion of a welfare benefit fund reverting to the benefit of the employer.
(2) Exception for collective bargaining plans
Paragraph (1)(B) shall not apply to any plan maintained pursuant to an agreement between employee representatives and 1 or more employers if the Secretary finds that such agreement is a collective bargaining agreement and that the benefits referred to in paragraph (1)(B) were the subject of good faith bargaining between such employee representatives and such employer or employers.
(3) Exception for nondeductible contributions
Paragraph (1)(C) shall not apply to any amount attributable to a contribution to the fund which is not allowable as a deduction under section 419 for the taxable year or any prior taxable year (and such contribution shall not be included in any carryover under section 419(d)).
(4) Exception for certain amounts charged against existing reserve
Subparagraphs (A) and (B) of paragraph (1) shall not apply to post-retirement benefits charged against an existing reserve for post-retirement medical or life insurance benefits (as defined in section 512(a)(3)(E)) or charged against the income on such reserve.
(c) Definitions
For purposes of this section, the terms used in this section shall have the same respective meanings as when used in subpart D of part I of subchapter D of
(Added
Editorial Notes
Codification
Amendments
1989—Subsec. (b)(5).
Subsecs. (c), (d).
1988—Subsec. (b)(5).
Subsec. (c).
Subsec. (c)(1)(B).
Subsec. (c)(2)(A).
Subsec. (d).
1986—Subsec. (b).
"(1) any medical benefit or life insurance benefit provided with respect to a key employee other than from a separate account established for such owner under section 419A(d), and
"(2) any post-retirement medical or life insurance benefit unless the plan meets the requirements of section 505(b)(1) with respect to such benefit, and
"(3) any portion of such fund reverting to the benefit of the employer."
Statutory Notes and Related Subsidiaries
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1011B(a)(27)(A), (B) of
Amendment by section 3021(a)(1)(C) of
Effective Date of 1986 Amendment
Amendment by
Effective Date
Section applicable to benefits provided after Dec. 31, 1985, see section 511(e)(7) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4977. Tax on certain fringe benefits provided by an employer
(a) Imposition of tax
In the case of an employer to whom an election under this section applies for any calendar year, there is hereby imposed a tax for such calendar year equal to 30 percent of the excess fringe benefits.
(b) Excess fringe benefits
For purposes of subsection (a), the term "excess fringe benefits" means, with respect to any calendar year—
(1) the aggregate value of the fringe benefits provided by the employer during the calendar year which were not includible in gross income under paragraphs (1) and (2) of section 132(a), over
(2) 1 percent of the aggregate amount of compensation—
(A) which was paid by the employer during such calendar year to employees, and
(B) was includible in gross income for purposes of
(c) Effect of election on section 132(a)
If—
(1) an election under this section is in effect with respect to an employer for any calendar year, and
(2) at all times on or after January 1, 1984, and before the close of the calendar year involved, substantially all of the employees of the employer were entitled to employee discounts on goods or services provided by the employer in 1 line of business,
for purposes of paragraphs (1) and (2) of section 132(a) (but not for purposes of section 132(h)), all employees of any line of business of the employer which was in existence on January 1, 1984, shall be treated as employees of the line of business referred to in paragraph (2).
(d) Period of election
An election under this section shall apply to the calendar year for which made and all subsequent calendar years unless revoked by the employer.
(e) Treatment of controlled groups
All employees treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.
(f) Section to apply only to employment within the United States
Except as otherwise provided in regulations, this section shall apply only with respect to employment within the United States.
(Added
Editorial Notes
Amendments
1996—Subsec. (c).
1993—Subsec. (c).
1986—Subsec. (c)(2).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date
Section effective Jan. 1, 1985, see section 531(h) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Application of Subsection (c) of this Section to Agricultural Cooperatives Incorporated in 1964
§4978. Tax on certain dispositions by employee stock ownership plans and certain cooperatives
(a) Tax on dispositions of securities to which section 1042 applies before close of minimum holding period
If, during the 3-year period after the date on which the employee stock ownership plan or eligible worker-owned cooperative acquired any qualified securities in a sale to which section 1042 applied or acquired any qualified employer securities in a qualified gratuitous transfer to which section 664(g) applied, such plan or cooperative disposes of any qualified securities and—
(1) the total number of shares held by such plan or cooperative after such disposition is less than the total number of employer securities held immediately after such sale, or
(2) except to the extent provided in regulations, the value of qualified securities held by such plan or cooperative after such disposition is less than 30 percent of the total value of all employer securities as of such disposition (60 percent of the total value of all employer securities as of such disposition in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied),
there is hereby imposed a tax on the disposition equal to the amount determined under subsection (b).
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) shall be equal to 10 percent of the amount realized on the disposition.
(2) Limitation
The amount realized taken into account under paragraph (1) shall not exceed that portion allocable to qualified securities acquired in the sale to which section 1042 applied or acquired in the qualified gratuitous transfer to which section 664(g) applied determined as if such securities were disposed of—
(A) first from qualified securities to which section 1042 applied or to which section 664(g) applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and
(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence.
(3) Distributions to employees
The amount realized on any distribution to an employee for less than fair market value shall be determined as if the qualified security had been sold to the employee at fair market value.
(c) Liability for payment of taxes
The tax imposed by this subsection shall be paid by—
(1) the employer, or
(2) the eligible worker-owned cooperative,
that made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3) (as the case may be).
(d) Section not to apply to certain dispositions
(1) Certain distributions to employees
This section shall not apply with respect to any distribution of qualified securities (or sale of such securities) which is made by reason of—
(A) the death of the employee,
(B) the retirement of the employee after the employee has attained 59½ years of age,
(C) the disability of the employee (within the meaning of section 72(m)(7)), or
(D) the separation of the employee from service for any period which results in a 1-year break in service (within the meaning of section 411(a)(6)(A)).
(2) Certain reorganizations
In the case of any exchange of qualified securities in any reorganization described in section 368(a)(1) for stock of another corporation, such exchange shall not be treated as a disposition for purposes of this section.
(3) Liquidation of corporation into cooperative
In the case of any exchange of qualified securities pursuant to the liquidation of the corporation issuing qualified securities into the eligible worker-owned cooperative in a transaction which meets the requirements of section 332 (determined by substituting "100 percent" for "80 percent" each place it appears in section 332(b)(1)), such exchange shall not be treated as a disposition for purposes of this section.
(4) Dispositions to meet diversification requirements
This section shall not apply to any disposition of qualified securities which is required under section 401(a)(28).
(e) Definitions and special rules
For purposes of this section—
(1) Employee stock ownership plan
The term "employee stock ownership plan" has the meaning given to such term by section 4975(e)(7).
(2) Qualified securities
The term "qualified securities" has the meaning given to such term by section 1042(c)(1); except that such section shall be applied without regard to subparagraph (B) thereof for purposes of applying this section and section 4979A with respect to securities acquired in a qualified gratuitous transfer (as defined in section 664(g)(1)).
(3) Eligible worker-owned cooperative
The term "eligible worker-owned cooperative" has the meaning given to such term by section 1042(c)(2).
(4) Disposition
The term "disposition" includes any distribution.
(5) Employer securities
The term "employer securities" has the meaning given to such term by section 409(l).
(Added
Editorial Notes
Amendments
2004—Subsec. (a)(2).
1997—Subsec. (a).
Subsec. (a)(2).
Subsec. (b)(2).
Subsec. (b)(2)(A).
Subsec. (c).
Subsec. (e)(2).
1996—Subsec. (b)(2).
"(A) first, from section 133 securities (as defined in section 4978B(e)(2)) acquired during the 3-year period ending on the date of such disposition, beginning with the securities first so acquired.
"(B) second, from section 133 securities (as so defined) acquired before such 3-year period unless such securities (or proceeds from the disposition) have been allocated to accounts of participants or beneficiaries.
"(C) third, from qualified securities to which section 1042 applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and
"(D) then from any other employer securities.
If subsection (d) or section 4978B(d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence."
1989—Subsec. (b)(2).
1988—Subsec. (d)(4).
1987—Subsec. (b)(2).
1986—Subsec. (a)(1).
Subsec. (b)(1).
Subsec. (c).
Subsec. (d)(1)(C).
Subsec. (d)(3).
Subsec. (e)(2).
Subsec. (e)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by section 1602(b)(1) of
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
Effective Date of 1986 Amendment
Amendment by
Effective Date
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[§4978A. Repealed. Pub. L. 101–239, title VII, §7304(a)(2)(C)(i), Dec. 19, 1989, 103 Stat. 2353 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to estates of decedents dying after Dec. 19, 1989, see section 7304(a)(3) of
[§4978B. Repealed. Pub. L. 104–188, title I, §1602(b)(5)(A), Aug. 20, 1996, 110 Stat. 1834 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to loans made after Aug. 20, 1996, with exception and provisions relating to certain refinancings, see section 1602(c) of
§4979. Tax on certain excess contributions
(a) General rule
In the case of any plan, there is hereby imposed a tax for the taxable year equal to 10 percent of the sum of—
(1) any excess contributions under such plan for the plan year ending in such taxable year, and
(2) any excess aggregate contributions under the plan for the plan year ending in such taxable year.
(b) Liability for tax
The tax imposed by subsection (a) shall be paid by the employer.
(c) Excess contributions
For purposes of this section, the term "excess contributions" has the meaning given such term by sections 401(k)(8)(B), 408(k)(6)(C), and 501(c)(18).
(d) Excess aggregate contribution
For purposes of this section, the term "excess aggregate contribution" has the meaning given to such term by section 401(m)(6)(B). For purposes of determining excess aggregate contributions under an annuity contract described in section 403(b), such contract shall be treated as a plan described in subsection (e)(1).
(e) Plan
For purposes of this section, the term "plan" means—
(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),
(2) any annuity plan described in section 403(a),
(3) any annuity contract described in section 403(b),
(4) a simplified employee pension of an employer which satisfies the requirements of section 408(k), and
(5) a plan described in section 501(c)(18).
Such term includes any plan which, at any time, has been determined by the Secretary to be such a plan.
(f) No tax where excess distributed within specified period after close of year
(1) In general
No tax shall be imposed under this section on any excess contribution or excess aggregate contribution, as the case may be, to the extent such contribution (together with any income allocable thereto through the end of the plan year for which the contribution was made) is distributed (or, if forfeitable, is forfeited) before the close of the first 2½ months (6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3))) of the following plan year.
(2) Year of inclusion
Any amount distributed as provided in paragraph (1) shall be treated as earned and received by the recipient in the recipient's taxable year in which such distributions were made.
(Added
Editorial Notes
Amendments
2006—Subsec. (f).
Subsec. (f)(1).
Subsec. (f)(2).
"(A)
"(B)
1988—Subsec. (a)(1).
Subsec. (c).
Subsec. (d).
Subsec. (f)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date
Section applicable to plan years beginning after Dec. 31, 1986, with special provisions for plans maintained pursuant to collective bargaining agreements ratified before Mar. 1, 1986, and for annuity contracts under
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out this section, see section 1141 of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4979A. Tax on certain prohibited allocations of qualified securities
(a) Imposition of tax
If—
(1) there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative,
(2) there is an allocation described in section 664(g)(5)(A),
(3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or
(4) any synthetic equity is owned by a disqualified person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.
(b) Prohibited allocation
For purposes of this section, the term "prohibited allocation" means—
(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and
(2) any benefit which accrues to any person in violation of the provisions of section 409(n).
(c) Liability for tax
The tax imposed by this section shall be paid—
(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by—
(A) the employer sponsoring such plan, or
(B) the eligible worker-owned cooperative,
which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and
(2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.
(d) Special statute of limitations for tax attributable to certain allocations
The statutory period for the assessment of any tax imposed by this section on an allocation described in subsection (a)(2) of qualified employer securities shall not expire before the date which is 3 years from the later of—
(1) the 1st allocation of such securities in connection with a qualified gratuitous transfer (as defined in section 664(g)(1)), or
(2) the date on which the Secretary is notified of the allocation described in subsection (a)(2).
(e) Definitions and special rules
For purposes of this section—
(1) Definitions
Except as provided in paragraph (2), terms used in this section have the same respective meanings as when used in sections 409 and 4978.
(2) Special rules relating to tax imposed by reason of paragraph (3) or (4) of subsection (a)
(A) Prohibited allocations
The amount involved with respect to any tax imposed by reason of subsection (a)(3) is the amount allocated to the account of any person in violation of section 409(p)(1).
(B) Synthetic equity
The amount involved with respect to any tax imposed by reason of subsection (a)(4) is the value of the shares on which the synthetic equity is based.
(C) Special rule during first nonallocation year
For purposes of subparagraph (A), the amount involved for the first nonallocation year of any employee stock ownership plan shall be determined by taking into account the total value of all the deemed-owned shares of all disqualified persons with respect to such plan.
(D) Statute of limitations
The statutory period for the assessment of any tax imposed by this section by reason of paragraph (3) or (4) of subsection (a) shall not expire before the date which is 3 years from the later of—
(i) the allocation or ownership referred to in such paragraph giving rise to such tax, or
(ii) the date on which the Secretary is notified of such allocation or ownership.
(Added and amended
Editorial Notes
Amendments
2001—Subsec. (a).
Subsec. (c).
"(1) the employer sponsoring such plan, or
"(2) the eligible worker-owned cooperative,
which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be)."
Subsec. (e).
1997—Subsec. (a).
Subsec. (c).
"(1) the employer sponsoring such plan, or
"(2) the eligible worker-owned cooperative,
which made the written statement described in section 1042(b)(3)(B)."
Subsecs. (d), (e).
1996—Subsec. (c).
1989—Subsec. (b)(1).
Subsec. (c).
1986—Subsec. (b)(1).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1172(b)(2) of
Effective Date
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§4980. Tax on reversion of qualified plan assets to employer
(a) Imposition of tax
There is hereby imposed a tax of 20 percent of the amount of any employer reversion from a qualified plan.
(b) Liability for tax
The tax imposed by subsection (a) shall be paid by the employer maintaining the plan.
(c) Definitions and special rules
For purposes of this section—
(1) Qualified plan
The term "qualified plan" means any plan meeting the requirements of section 401(a) or 403(a), other than—
(A) a plan maintained by an employer if such employer has, at all times, been exempt from tax under subtitle A, or
(B) a governmental plan (within the meaning of section 414(d)).
Such term shall include any plan which, at any time, has been determined by the Secretary to be a qualified plan.
(2) Employer reversion
(A) In general
The term "employer reversion" means the amount of cash and the fair market value of other property received (directly or indirectly) by an employer from the qualified plan.
(B) Exceptions
The term "employer reversion" shall not include—
(i) except as provided in regulations, any amount distributed to or on behalf of any employee (or his beneficiaries) if such amount could have been so distributed before termination of such plan without violating any provision of section 401,
(ii) any distribution to the employer which is allowable under section 401(a)(2)—
(I) in the case of a multiemployer plan, by reason of mistakes of law or fact or the return of any withdrawal liability payment,
(II) in the case of a plan other than a multiemployer plan, by reason of mistake of fact, or
(III) in the case of any plan, by reason of the failure of the plan to initially qualify or the failure of contributions to be deductible, or
(iii) any transfer described in section 420(f)(2)(B)(ii)(II).
(3) Exception for employee stock ownership plans
(A) In general
If, upon an employer reversion from a qualified plan, any applicable amount is transferred from such plan to an employee stock ownership plan described in section 4975(e)(7) or a tax credit employee stock ownership plan (as described in section 409), such amount shall not be treated as an employer reversion for purposes of this section (or includible in the gross income of the employer) if the requirements of subparagraphs (B), (C), and (D) are met.
(B) Investment in employer securities
The requirements of this subparagraph are met if, within 90 days after the transfer (or such longer period as the Secretary may prescribe), the amount transferred is invested in employer securities (as defined in section 409(l)) or used to repay loans used to purchase such securities.
(C) Allocation requirements
The requirements of this subparagraph are met if the portion of the amount transferred which is not allocated under the plan to accounts of participants in the plan year in which the transfer occurs—
(i) is credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over a period not to exceed 7 years, and
(ii) when allocated to accounts of participants under the plan, is treated as an employer contribution for purposes of section 415(c), except that—
(I) the annual addition (as determined under section 415(c)) attributable to each such allocation shall not exceed the value of such securities as of the time such securities were credited to such suspense account, and
(II) no additional employer contributions shall be permitted to an employee stock ownership plan described in subparagraph (A) of the employer before the allocation of such amount.
The amount allocated in the year of transfer shall not be less than the lesser of the maximum amount allowable under section 415 or 1/8 of the amount attributable to the securities acquired. In the case of dividends on securities held in the suspense account, the requirements of this subparagraph are met only if the dividends are allocated to accounts of participants or paid to participants in proportion to their accounts, or used to repay loans used to purchase employer securities.
(D) Participants
The requirements of this subparagraph are met if at least half of the participants in the qualified plan are participants in the employee stock ownership plan (as of the close of the 1st plan year for which an allocation of the securities is required).
(E) Applicable amount
For purposes of this paragraph, the term "applicable amount" means any amount which—
(i) is transferred after March 31, 1985, and before January 1, 1989, or
(ii) is transferred after December 31, 1988, pursuant to a termination which occurs after March 31, 1985, and before January 1, 1989.
(F) No credit or deduction allowed
No credit or deduction shall be allowed under
(G) Amount transferred to include income thereon, etc.
The amount transferred shall not be treated as meeting the requirements of subparagraphs (B) and (C) unless amounts attributable to such amount also meet such requirements.
(4) Time for payment of tax
For purposes of subtitle F, the time for payment of the tax imposed by subsection (a) shall be the last day of the month following the month in which the employer reversion occurs.
(d) Increase in tax for failure to establish replacement plan or increase benefits
(1) In general
Subsection (a) shall be applied by substituting "50 percent" for "20 percent" with respect to any employer reversion from a qualified plan unless—
(A) the employer establishes or maintains a qualified replacement plan, or
(B) the plan provides benefit increases meeting the requirements of paragraph (3).
(2) Qualified replacement plan
For purposes of this subsection, the term "qualified replacement plan" means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the "replacement plan") with respect to which the following requirements are met:
(A) Participation requirement
At least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan.
(B) Asset transfer requirement
(i) 25 percent cushion
A direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of—
(I) 25 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, over
(II) the amount determined under clause (ii).
(ii) Reduction for increase in benefits
The amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which—
(I) is adopted during the 60-day period ending on the date of termination of the qualified plan, and
(II) takes effect immediately on the termination date.
(iii) Treatment of amount transferred
In the case of the transfer of any amount under clause (i)—
(I) such amount shall not be includible in the gross income of the employer,
(II) no deduction shall be allowable with respect to such transfer, and
(III) such transfer shall not be treated as an employer reversion for purposes of this section.
(C) Allocation requirements
(i) In general
In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is—
(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or
(II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer.
(ii) Coordination with section 415 limitation
If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause—
(I) such amount shall be allocated to the accounts of other participants, and
(II) if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415.
(iii) Treatment of income
Any income on any amount credited to a suspense account under clause (i)(II) shall be allocated to accounts of participants no less rapidly than ratably over the remainder of the period determined under such clause (after application of clause (ii)).
(iv) Unallocated amounts at termination
If any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan—
(I) such amount shall be allocated to the accounts of participants as of such date, except that any amount which may not be allocated by reason of any limitation under section 415 shall be allocated to the accounts of other participants, and
(II) if any portion of such amount may not be allocated to other participants under subclause (I) by reason of such limitation, such portion shall be treated as an employer reversion to which this section applies.
(3) Pro rata benefit increases
(A) In general
The requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which—
(i) have an aggregate present value not less than 20 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, and
(ii) take effect immediately on the termination date.
(B) Pro rata increase
For purposes of subparagraph (A), a pro rata increase is an increase in the present value of the accrued benefit of each qualified participant in an amount which bears the same ratio to the aggregate amount determined under subparagraph (A)(i) as—
(i) the present value of such participant's accrued benefit (determined without regard to this subsection), bears to
(ii) the aggregate present value of accrued benefits of the terminated plan (as so determined).
Notwithstanding the preceding sentence, the aggregate increases in the present value of the accrued benefits of qualified participants who are not active participants shall not exceed 40 percent of the aggregate amount determined under subparagraph (A)(i) by substituting "equal to" for "not less than".
(4) Coordination with other provisions
(A) Limitations
A benefit may not be increased under paragraph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under paragraph (2)(C), if such increase or allocation would result in a failure to meet any requirement under section 401(a)(4) or 415.
(B) Treatment as employer contributions
Any increase in benefits under paragraph (2)(B)(ii) or (3)(A), or any allocation of any amount (or income allocable thereto) to any account under paragraph (2)(C), shall be treated as an annual benefit or annual addition for purposes of section 415.
(C) 10-year participation requirement
Except as provided by the Secretary, section 415(b)(5)(D) shall not apply to any increase in benefits by reason of this subsection to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414(q)).
(5) Definitions and special rules
For purposes of this subsection—
(A) Qualified participant
The term "qualified participant" means an individual who—
(i) is an active participant,
(ii) is a participant or beneficiary in pay status as of the termination date,
(iii) is a participant not described in clause (i) or (ii)—
(I) who has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date, and
(II) whose service, which was creditable under the terminated plan, terminated during the period beginning 3 years before the termination date and ending with the date on which the final distribution of assets occurs, or
(iv) is a beneficiary of a participant described in clause (iii)(II) and has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date.
(B) Present value
Present value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on termination.
(C) Reallocation of increase
Except as provided in paragraph (2)(C), if any benefit increase is reduced by reason of the last sentence of paragraph (3)(A)(ii) or paragraph (4), the amount of such reduction shall be allocated to the remaining participants on the same basis as other increases (and shall be treated as meeting any allocation requirement of this subsection).
(D) Plans taken into account
For purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that—
(i) 2 or more plans may be treated as 1 plan, or
(ii) a plan of a successor employer may be taken into account.
(E) Special rule for participation requirement
For purposes of paragraph (2)(A), all employers treated as 1 employer under section 414(b), (c), (m), or (o) shall be treated as 1 employer.
(6) Subsection not to apply to employer in bankruptcy
This subsection shall not apply to an employer who, as of the termination date of the qualified plan, is in bankruptcy liquidation under
(Added
Editorial Notes
Amendments
2008—Subsec. (c)(2)(B)(iii).
2006—Subsec. (c)(3)(A).
"(i) the requirements of subparagraphs (B), (C), and (D) are met, and
"(ii) under the plan, employer securities to which subparagraph (B) applies must, except to the extent necessary to meet the requirements of section 401(a)(28), remain in the plan until distribution to participants in accordance with the provisions of such plan".
1996—Subsecs. (a), (d).
1990—Subsec. (a).
Subsec. (d).
1988—Subsec. (a).
Subsec. (c)(1)(A).
Subsec. (c)(3)(A).
Subsec. (c)(3)(C).
Subsec. (c)(3)(F), (G).
Subsec. (c)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1990 Amendment
"(a)
"(b)
"(1) in the case of plans subject to title IV of the Employee Retirement Income Security Act of 1974 [
"(2) in the case of plans subject to title I [
"(3) in the case of plans not subject to title I or IV of such Act, a request for a determination letter with respect to the termination was filed with the Secretary of the Treasury or the Secretary's delegate before October 1, 1990, or
"(4) in the case of plans not subject to title I or IV of such Act and having only 1 participant, a resolution terminating the plan was adopted by the employer before October 1, 1990."
Effective Date of 1988 Amendment
Amendment by section 1011A(f)(1)–(3), (6), (7) of
"(1)
"(2)
"(A) with respect to plans subject to title IV of the Employee Retirement Income Security Act of 1974 [
"(B) with respect to plans subject to title I of such Act [
"(C) with respect to plans not subject to title I or IV of such Act, the Board of Directors of the employer approved the termination or the employer took other binding action before October 21, 1988, or
"(D) such plan termination was directed by a final order of a court of competent jurisdiction entered before October 21, 1988, and notice of such order was provided to participants before such date."
Effective Date
"(1)
"(2)
"(A)
"(B)
"(3)
"(4)
"(A)
"(B)
"(i) a corporation incorporated on June 13, 1917, which has its principal place of business in Bartlesville, Oklahoma,
"(ii) a corporation incorporated on January 17, 1917, which is located in Coatesville, Pennsylvania,
"(iii) a corporation incorporated on January 23, 1928, which has its principal place of business in New York, New York,
"(iv) a corporation incorporated on April 23, 1956, which has its principal place of business in Dallas, Texas, and
"(v) a corporation incorporated in the State of Nevada, the principal place of business of which is in Denver, Colorado, and which filed for relief from creditors under the United States Bankruptcy Code on August 28, 1986.
"(5)
Transfer of Excess Assets From Qualified Pension Plan to Welfare Benefit Plan
"(1) Notwithstanding any other provision of law, in the case of any qualified pension plan and welfare benefit plan described in paragraph (2), the assets of such pension plan in excess of its liabilities may be transferred to such welfare benefit plan upon the termination of such pension plan if such assets are to be used to provide retiree health benefits.
"(2) For purposes of paragraph (1), a qualified pension plan and welfare benefit plan are described in this paragraph if—
"(A) both such plans are jointly administered pursuant to a collective bargaining agreement between the employer maintaining such plans and one or more employee representatives,
"(B) the welfare benefit plan provides retiree health benefits, and
"(C) the qualified pension plan has assets in excess of liabilities (determined on a termination basis) and the welfare benefit plan has assets which are less than the present value of the benefits to be provided under the plan (determined as of the time of termination of the pension plan).
"(3) For purposes of the Internal Revenue Code of 1986, any transfer of assets to which paragraph (1) applies shall be treated as a reversion of such assets to the employer maintaining the plan which is includible in the gross income of such employer and subject to the tax imposed by section 4980 of such Code."
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[§4980A. Repealed. Pub. L. 105–34, title X, §1073(a), Aug. 5, 1997, 111 Stat. 948 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
"(1)
"(2)
§4980B. Failure to satisfy continuation coverage requirements of group health plans
(a) General rule
There is hereby imposed a tax on the failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure with respect to a qualified beneficiary shall be $100 for each day in the noncompliance period with respect to such failure.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period" means, with respect to any failure, the period—
(A) beginning on the date such failure first occurs, and
(B) ending on the earlier of—
(i) the date such failure is corrected, or
(ii) the date which is 6 months after the last day in the period applicable to the qualified beneficiary under subsection (f)(2)(B) (determined without regard to clause (iii) thereof).
If a person is liable for tax under subsection (e)(1)(B) by reason of subsection (e)(2)(B) with respect to any failure, the noncompliance period for such person with respect to such failure shall not begin before the 45th day after the written request described in subsection (e)(2)(B) is provided to such person.
(3) Minimum tax for noncompliance period where failure discovered after notice of examination
Notwithstanding paragraphs (1) and (2) of subsection (c)—
(A) In general
In the case of 1 or more failures with respect to a qualified beneficiary—
(i) which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and
(ii) which occurred or continued during the period under examination,
the amount of tax imposed by subsection (a) by reason of such failures with respect to such beneficiary shall not be less than the lesser of $2,500 or the amount of tax which would be imposed by subsection (a) without regard to such paragraphs.
(B) Higher minimum tax where violations are more than de minimis
To the extent violations by the employer (or the plan in the case of a multiemployer plan) for any year are more than de minimis, subparagraph (A) shall be applied by substituting "$15,000" for "$2,500" with respect to the employer (or such plan).
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered exercising reasonable diligence
No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that none of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed.
(2) Tax not to apply to failures corrected within 30 days
No tax shall be imposed by subsection (a) on any failure if—
(A) such failure was due to reasonable cause and not to willful neglect, and
(B) such failure is corrected during the 30-day period beginning on the 1st date any of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed.
(3) $100 limit on amount of tax for failures on any day with respect to a qualified beneficiary
(A) In general
Except as provided in subparagraph (B), the maximum amount of tax imposed by subsection (a) on failures on any day during the noncompliance period with respect to a qualified beneficiary shall be $100.
(B) Special rule where more than 1 qualified beneficiary
If there is more than 1 qualified beneficiary with respect to the same qualifying event, the maximum amount of tax imposed by subsection (a) on all failures on any day during the noncompliance period with respect to such qualified beneficiaries shall be $200.
(4) Overall limitation for unintentional failures
In the case of failures which are due to reasonable cause and not to willful neglect—
(A) Single employer plans
(i) In general
In the case of failures with respect to plans other than multiemployer plans, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—
(I) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or
(II) $500,000.
(ii) Taxable years in the case of certain controlled groups
For purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561.
(B) Multiemployer plans
(i) In general
In the case of failures with respect to a multiemployer plan, the tax imposed by subsection (a) for failures during the taxable year of the trust forming part of such plan shall not exceed the amount equal to the lesser of—
(I) 10 percent of the amount paid or incurred by such trust during such taxable year to provide medical care (as defined in section 213(d)) directly or through insurance, reimbursement, or otherwise, or
(II) $500,000.
For purposes of the preceding sentence, all plans of which the same trust forms a part shall be treated as 1 plan.
(ii) Special rule for employers required to pay tax
If an employer is assessed a tax imposed by subsection (a) by reason of a failure with respect to a multiemployer plan, the limit shall be determined under subparagraph (A) (and not under this subparagraph) and as if such plan were not a multiemployer plan.
(C) Special rule for persons providing benefits
In the case of a person described in subsection (e)(1)(B) (and not subsection (e)(1)(A)), the aggregate amount of tax imposed by subsection (a) for failures during a taxable year with respect to all plans shall not exceed $2,000,000.
(5) Waiver by Secretary
In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.
(d) Tax not to apply to certain plans
This section shall not apply to—
(1) any failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary if the qualifying event with respect to such beneficiary occurred during the calendar year immediately following a calendar year during which all employers maintaining such plan normally employed fewer than 20 employees on a typical business day,
(2) any governmental plan (within the meaning of section 414(d)), or
(3) any church plan (within the meaning of section 414(e)).
(e) Liability for tax
(1) In general
Except as otherwise provided in this subsection, the following shall be liable for the tax imposed by subsection (a) on a failure:
(A)(i) In the case of a plan other than a multiemployer plan, the employer.
(ii) In the case of a multiemployer plan, the plan.
(B) Each person who is responsible (other than in a capacity as an employee) for administering or providing benefits under the plan and whose act or failure to act caused (in whole or in part) the failure.
(2) Special rules for persons described in paragraph (1)(B)
(A) No liability unless written agreement
Except in the case of liability resulting from the application of subparagraph (B) of this paragraph, a person described in subparagraph (B) (and not in subparagraph (A)) of paragraph (1) shall be liable for the tax imposed by subsection (a) on any failure only if such person assumed (under a legally enforceable written agreement) responsibility for the performance of the act to which the failure relates.
(B) Failure to cover qualified beneficiaries where current employees are covered
A person shall be treated as described in paragraph (1)(B) with respect to a qualified beneficiary if—
(i) such person provides coverage under a group health plan for any similarly situated beneficiary under the plan with respect to whom a qualifying event has not occurred, and
(ii) the—
(I) employer or plan administrator, or
(II) in the case of a qualifying event described in subparagraph (C) or (E) of subsection (f)(3) where the person described in clause (i) is the plan administrator, the qualified beneficiary,
submits to such person a written request that such person make available to such qualified beneficiary the same coverage which such person provides to the beneficiary referred to in clause (i).
(f) Continuation coverage requirements of group health plans
(1) In general
A group health plan meets the requirements of this subsection only if the coverage of the costs of pediatric vaccines (as defined under section 1928(h)(6) of the Social Security Act (
(2) Continuation coverage
For purposes of paragraph (1), the term "continuation coverage" means coverage under the plan which meets the following requirements:
(A) Type of benefit coverage
The coverage must consist of coverage which, as of the time the coverage is being provided, is identical to the coverage provided under the plan to similarly situated beneficiaries under the plan with respect to whom a qualifying event has not occurred. If coverage under the plan is modified for any group of similarly situated beneficiaries, the coverage shall also be modified in the same manner for all individuals who are qualified beneficiaries under the plan pursuant to this subsection in connection with such group.
(B) Period of coverage
The coverage must extend for at least the period beginning on the date of the qualifying event and ending not earlier than the earliest of the following:
(i) Maximum required period
(I) General rule for terminations and reduced hours
In the case of a qualifying event described in paragraph (3)(B), except as provided in subclause (II), the date which is 18 months after the date of the qualifying event.
(II) Special rule for multiple qualifying events
If a qualifying event (other than a qualifying event described in paragraph (3)(F)) occurs during the 18 months after the date of a qualifying event described in paragraph (3)(B), the date which is 36 months after the date of the qualifying event described in paragraph (3)(B).
(III) Special rule for certain bankruptcy proceedings
In the case of a qualifying event described in paragraph (3)(F) (relating to bankruptcy proceedings), the date of the death of the covered employee or qualified beneficiary (described in subsection (g)(1)(D)(iii)), or in the case of the surviving spouse or dependent children of the covered employee, 36 months after the date of the death of the covered employee.
(IV) General rule for other qualifying events
In the case of a qualifying event not described in paragraph (3)(B) or (3)(F), the date which is 36 months after the date of the qualifying event.
(V) Special rule for PBGC recipients
In the case of a qualifying event described in paragraph (3)(B) with respect to a covered employee who (as of such qualifying event) has a nonforfeitable right to a benefit any portion of which is to be paid by the Pension Benefit Guaranty Corporation under title IV of the Employee Retirement Income Security Act of 1974, notwithstanding subclause (I) or (II), the date of the death of the covered employee, or in the case of the surviving spouse or dependent children of the covered employee, 24 months after the date of the death of the covered employee. The preceding sentence shall not require any period of coverage to extend beyond January 1, 2014.
(VI) Special rule for TAA-eligible individuals
In the case of a qualifying event described in paragraph (3)(B) with respect to a covered employee who is (as of the date that the period of coverage would, but for this subclause or subclause (VII), otherwise terminate under subclause (I) or (II)) a TAA-eligible individual (as defined in paragraph (5)(C)(iv)(II)), the period of coverage shall not terminate by reason of subclause (I) or (II), as the case may be, before the later of the date specified in such subclause or the date on which such individual ceases to be such a TAA-eligible individual. The preceding sentence shall not require any period of coverage to extend beyond January 1, 2014.
(VII) Medicare entitlement followed by qualifying event
In the case of a qualifying event described in paragraph (3)(B) that occurs less than 18 months after the date the covered employee became entitled to benefits under title XVIII of the Social Security Act, the period of coverage for qualified beneficiaries other than the covered employee shall not terminate under this clause before the close of the 36-month period beginning on the date the covered employee became so entitled.
(VIII) Special rule for disability
In the case of a qualified beneficiary who is determined, under title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of continuation coverage under this section, any reference in subclause (I) or (II) to 18 months is deemed a reference to 29 months (with respect to all qualified beneficiaries), but only if the qualified beneficiary has provided notice of such determination under paragraph (6)(C) before the end of such 18 months.
(ii) End of plan
The date on which the employer ceases to provide any group health plan to any employee.
(iii) Failure to pay premium
The date on which coverage ceases under the plan by reason of a failure to make timely payment of any premium required under the plan with respect to the qualified beneficiary. The payment of any premium (other than any payment referred to in the last sentence of subparagraph (C)) shall be considered to be timely if made within 30 days after the date due or within such longer period as applies to or under the plan.
(iv) Group health plan coverage or medicare entitlement
The date on which the qualified beneficiary first becomes, after the date of the election—
(I) covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary (other than such an exclusion or limitation which does not apply to (or is satisfied by) such beneficiary by reason of
(II) in the case of a qualified beneficiary other than a qualified beneficiary described in subsection (g)(1)(D) entitled to benefits under title XVIII of the Social Security Act.
(v) Termination of extended coverage for disability
In the case of a qualified beneficiary who is disabled at any time during the first 60 days of continuation coverage under this section, the month that begins more than 30 days after the date of the final determination under title II or XVI of the Social Security Act that the qualified beneficiary is no longer disabled.
(C) Premium requirements
The plan may require payment of a premium for any period of continuation coverage, except that such premium—
(i) shall not exceed 102 percent of the applicable premium for such period, and
(ii) may, at the election of the payor, be made in monthly installments.
In no event may the plan require the payment of any premium before the day which is 45 days after the day on which the qualified beneficiary made the initial election for continuation coverage. In the case of an individual described in the last sentence of subparagraph (B)(i), any reference in clause (i) of this subparagraph to "102 percent" is deemed a reference to "150 percent" for any month after the 18th month of continuation coverage described in subclause (I) or (II) of subparagraph (B)(i).
(D) No requirement of insurability
The coverage may not be conditioned upon, or discriminate on the basis of lack of, evidence of insurability.
(E) Conversion option
In the case of a qualified beneficiary whose period of continuation coverage expires under subparagraph (B)(i), the plan must, during the 180-day period ending on such expiration date, provide to the qualified beneficiary the option of enrollment under a conversion health plan otherwise generally available under the plan.
(3) Qualifying event
For purposes of this subsection, the term "qualifying event" means, with respect to any covered employee, any of the following events which, but for the continuation coverage required under this subsection, would result in the loss of coverage of a qualified beneficiary—
(A) The death of the covered employee.
(B) The termination (other than by reason of such employee's gross misconduct), or reduction of hours, of the covered employee's employment.
(C) The divorce or legal separation of the covered employee from the employee's spouse.
(D) The covered employee becoming entitled to benefits under title XVIII of the Social Security Act.
(E) A dependent child ceasing to be a dependent child under the generally applicable requirements of the plan.
(F) A proceeding in a case under
In the case of an event described in subparagraph (F), a loss of coverage includes a substantial elimination of coverage with respect to a qualified beneficiary described in subsection (g)(1)(D) within one year before or after the date of commencement of the proceeding.
(4) Applicable premium
For purposes of this subsection—
(A) In general
The term "applicable premium" means, with respect to any period of continuation coverage of qualified beneficiaries, the cost to the plan for such period of the coverage for similarly situated beneficiaries with respect to whom a qualifying event has not occurred (without regard to whether such cost is paid by the employer or employee).
(B) Special rule for self-insured plans
To the extent that a plan is a self-insured plan—
(i) In general
Except as provided in clause (ii), the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to a reasonable estimate of the cost of providing coverage for such period for similarly situated beneficiaries which—
(I) is determined on an actuarial basis, and
(II) takes into account such factors as the Secretary may prescribe in regulations.
(ii) Determination on basis of past cost
If a plan administrator elects to have this clause apply, the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to—
(I) the cost to the plan for similarly situated beneficiaries for the same period occurring during the preceding determination period under subparagraph (C), adjusted by
(II) the percentage increase or decrease in the implicit price deflator of the gross national product (calculated by the Department of Commerce and published in the Survey of Current Business) for the 12-month period ending on the last day of the sixth month of such preceding determination period.
(iii) Clause (ii) not to apply where significant change
A plan administrator may not elect to have clause (ii) apply in any case in which there is any significant difference between the determination period and the preceding determination period, in coverage under, or in employees covered by, the plan. The determination under the preceding sentence for any determination period shall be made at the same time as the determination under subparagraph (C).
(C) Determination period
The determination of any applicable premium shall be made for a period of 12 months and shall be made before the beginning of such period.
(5) Election
For purposes of this subsection—
(A) Election period
The term "election period" means the period which—
(i) begins not later than the date on which coverage terminates under the plan by reason of a qualifying event,
(ii) is of at least 60 days' duration, and
(iii) ends not earlier than 60 days after the later of—
(I) the date described in clause (i), or
(II) in the case of any qualified beneficiary who receives notice under paragraph (6)(D), the date of such notice.
(B) Effect of election on other beneficiaries
Except as otherwise specified in an election, any election of continuation coverage by a qualified beneficiary described in subparagraph (A)(i) or (B) of subsection (g)(1) shall be deemed to include an election of continuation coverage on behalf of any other qualified beneficiary who would lose coverage under the plan by reason of the qualifying event. If there is a choice among types of coverage under the plan, each qualified beneficiary is entitled to make a separate selection among such types of coverage.
(C) Temporary extension of COBRA election period for certain individuals
(i) In general
In the case of a nonelecting TAA-eligible individual and notwithstanding subparagraph (A), such individual may elect continuation coverage under this subsection during the 60-day period that begins on the first day of the month in which the individual becomes a TAA-eligible individual, but only if such election is made not later than 6 months after the date of the TAA-related loss of coverage.
(ii) Commencement of coverage; no reach-back
Any continuation coverage elected by a TAA-eligible individual under clause (i) shall commence at the beginning of the 60-day election period described in such paragraph and shall not include any period prior to such 60-day election period.
(iii) Preexisting conditions
With respect to an individual who elects continuation coverage pursuant to clause (i), the period—
(I) beginning on the date of the TAA-related loss of coverage, and
(II) ending on the first day of the 60-day election period described in clause (i),
shall be disregarded for purposes of determining the 63-day periods referred to in section 9801(c)(2), section 701(c)(2) of the Employee Retirement Income Security Act of 1974, and section 2704(c)(2) of the Public Health Service Act.
(iv) Definitions
For purposes of this subsection:
(I) Nonelecting TAA-eligible individual
The term "nonelecting TAA-eligible individual" means a TAA-eligible individual who has a TAA-related loss of coverage and did not elect continuation coverage under this subsection during the TAA-related election period.
(II) TAA-eligible individual
The term "TAA-eligible individual" means an eligible TAA recipient (as defined in paragraph (2) of section 35(c)) and an eligible alternative TAA recipient (as defined in paragraph (3) of such section).
(III) TAA-related election period
The term "TAA-related election period" means, with respect to a TAA-related loss of coverage, the 60-day election period under this subsection which is a direct consequence of such loss.
(IV) TAA-related loss of coverage
The term "TAA-related loss of coverage" means, with respect to an individual whose separation from employment gives rise to being an TAA-eligible individual, the loss of health benefits coverage associated with such separation.
(6) Notice requirement
In accordance with regulations prescribed by the Secretary—
(A) The group health plan shall provide, at the time of commencement of coverage under the plan, written notice to each covered employee and spouse of the employee (if any) of the rights provided under this subsection.
(B) The employer of an employee under a plan must notify the plan administrator of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3) with respect to such employee within 30 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date of the qualifying event.
(C) Each covered employee or qualified beneficiary is responsible for notifying the plan administrator of the occurrence of any qualifying event described in subparagraph (C) or (E) of paragraph (3) within 60 days after the date of the qualifying event and each qualified beneficiary who is determined, under title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of continuation coverage under this section is responsible for notifying the plan administrator of such determination within 60 days after the date of the determination and for notifying the plan administrator within 30 days of the date of any final determination under such title or titles that the qualified beneficiary is no longer disabled.
(D) The plan administrator shall notify—
(i) in the case of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3), any qualified beneficiary with respect to such event, and
(ii) in the case of a qualifying event described in subparagraph (C) or (E) of paragraph (3) where the covered employee notifies the plan administrator under subparagraph (C), any qualified beneficiary with respect to such event,
of such beneficiary's rights under this subsection.
The requirements of subparagraph (B) shall be considered satisfied in the case of a multiemployer plan in connection with a qualifying event described in paragraph (3)(B) if the plan provides that the determination of the occurrence of such qualifying event will be made by the plan administrator. For purposes of subparagraph (D), any notification shall be made within 14 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date on which the plan administrator is notified under subparagraph (B) or (C), whichever is applicable, and any such notification to an individual who is a qualified beneficiary as the spouse of the covered employee shall be treated as notification to all other qualified beneficiaries residing with such spouse at the time such notification is made.
(7) Covered employee
For purposes of this subsection, the term "covered employee" means an individual who is (or was) provided coverage under a group health plan by virtue of the performance of services by the individual for 1 or more persons maintaining the plan (including as an employee defined in section 401(c)(1)).
(8) Optional extension of required periods
A group health plan shall not be treated as failing to meet the requirements of this subsection solely because the plan provides both—
(A) that the period of extended coverage referred to in paragraph (2)(B) commences with the date of the loss of coverage, and
(B) that the applicable notice period provided under paragraph (6)(B) commences with the date of the loss of coverage.
(g) Definitions
For purposes of this section—
(1) Qualified beneficiary
(A) In general
The term "qualified beneficiary" means, with respect to a covered employee under a group health plan, any other individual who, on the day before the qualifying event for that employee, is a beneficiary under the plan—
(i) as the spouse of the covered employee, or
(ii) as the dependent child of the employee.
Such term shall also include a child who is born to or placed for adoption with the covered employee during the period of continuation coverage under this section.
(B) Special rule for terminations and reduced employment
In the case of a qualifying event described in subsection (f)(3)(B), the term "qualified beneficiary" includes the covered employee.
(C) Exception for nonresident aliens
Notwithstanding subparagraphs (A) and (B), the term "qualified beneficiary" does not include an individual whose status as a covered employee is attributable to a period in which such individual was a nonresident alien who received no earned income (within the meaning of section 911(d)(2)) from the employer which constituted income from sources within the United States (within the meaning of section 861(a)(3)). If an individual is not a qualified beneficiary pursuant to the previous sentence, a spouse or dependent child of such individual shall not be considered a qualified beneficiary by virtue of the relationship of the individual.
(D) Special rule for retirees and widows
In the case of a qualifying event described in subsection (f)(3)(F), the term "qualified beneficiary" includes a covered employee who had retired on or before the date of substantial elimination of coverage and any other individual who, on the day before such qualifying event, is a beneficiary under the plan—
(i) as the spouse of the covered employee,
(ii) as the dependent child of the covered employee, or
(iii) as the surviving spouse of the covered employee.
(2) Group health plan
The term "group health plan" has the meaning given such term by section 5000(b)(1). Such term shall not include any plan substantially all of the coverage under which is for qualified long-term care services (as defined in section 7702B(c)).
(3) Plan administrator
The term "plan administrator" has the meaning given the term "administrator" by section 3(16)(A) of the Employee Retirement Income Security Act of 1974.
(4) Correction
A failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary shall be treated as corrected if—
(A) such failure is retroactively undone to the extent possible, and
(B) the qualified beneficiary is placed in a financial position which is as good as such beneficiary would have been in had such failure not occurred.
For purposes of applying subparagraph (B), the qualified beneficiary shall be treated as if he had elected the most favorable coverage in light of the expenses he incurred since the failure first occurred.
(Added
Editorial Notes
References in Text
The Social Security Act, referred to in subsec. (f)(2)(B)(i)(IV), (VII), (VIII), (iv)(II), (v), (3)(D), (6)(C), is act Aug. 14, 1935, ch. 531,
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (f)(2)(B)(i)(V), (iv)(I), (5)(C)(iii), and (g)(3), is
The Public Health Service Act, referred to in subsec. (f)(2)(B)(iv)(I), (5)(C)(iii), is act July 1, 1944, ch. 373,
Amendments
2018—Subsec. (f)(1).
Subsec. (f)(5)(C)(iii).
2011—Subsec. (f)(2)(B)(i)(V), (VI).
2010—Subsec. (f)(2)(B)(i)(V), (VI).
2009—Subsec. (f)(2)(B)(i)(V).
Subsec. (f)(2)(B)(i)(VI).
Subsec. (f)(2)(B)(i)(VII), (VIII).
2002—Subsec. (f)(5)(C).
1996—Subsec. (f)(2)(B)(i).
Subsec. (f)(2)(B)(i)(V).
Subsec. (f)(2)(B)(iv)(I).
Subsec. (f)(2)(B)(v).
Subsec. (f)(6)(C).
Subsec. (g)(1)(A).
Subsec. (g)(2).
1993—Subsec. (f)(1).
1990—Subsec. (d)(1).
1989—Subsec. (f)(2)(B)(i).
Subsec. (f)(2)(B)(i)(V).
Subsec. (f)(2)(B)(iv).
Subsec. (f)(2)(B)(v).
Subsec. (f)(2)(C).
Subsec. (f)(6).
Subsec. (f)(6)(B).
Subsec. (f)(6)(C).
Subsec. (f)(7).
Subsec. (f)(8).
Subsec. (g)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2011 Amendment
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Except as otherwise provided and subject to certain applicability provisions, amendment by
Effective Date of 2002 Amendment
Amendment by
Effective Date of 1996 Amendments
Amendment by section 321(d)(1) of
Effective Date of 1993 Amendment
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by section 6202(b)(3)(B) of
Amendment by section 7862(c)(3)(C) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1988, but not applicable to any plan for any plan year to which
Construction of 2002 Amendment
Nothing in amendment by
Preserving Health Benefits for Workers
"(a)
"(1)
"(A)
"(B)
"(i)
"(ii)
"(I) the employer involved has made a determination that such employer will permit such assistance eligible individual to enroll in different coverage as provided under this subparagraph;
"(II) the premium for such different coverage does not exceed the premium for coverage in which such individual was enrolled at the time such qualifying event occurred;
"(III) the different coverage in which the individual elects to enroll is coverage that is also offered to similarly situated active employees of the employer at the time at which such election is made; and
"(IV) the different coverage in which the individual elects to enroll is not—
(aa) coverage that provides only excepted benefits as defined in section 9832(c) of the Internal Revenue Code of 1986, section 733(c) of the Employee Retirement Income Security Act of 1974 [
(bb) a qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986); or
(cc) a flexible spending arrangement (as defined in section 106(c)(2) of the Internal Revenue Code of 1986).
"(2)
"(A)
"(i) the first date that such individual is eligible for coverage under any other group health plan (other than coverage consisting of only excepted benefits (as defined in section 9832(c) of the Internal Revenue Code of 1986, section 733(c) of the Employee Retirement Income Security Act of 1974, and section 2791(c) of the Public Health Service Act), coverage under a flexible spending arrangement (as defined in section 106(c)(2) of the Internal Revenue Code of 1986), coverage under a qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986)), or eligible for benefits under the Medicare program under title XVIII of the Social Security Act [
"(ii) the earlier of—
"(I) the date following the expiration of the maximum period of continuation coverage required under the applicable COBRA continuation coverage provision; or
"(II) the date following the expiration of the period of continuation coverage allowed under paragraph (4)(B)(ii).
"(B)
"(3)
"(A) is eligible for COBRA continuation coverage by reason of a qualifying event specified in section 603(2) of the Employee Retirement Income Security Act of 1974, section 4980B(f)(3)(B) of the Internal Revenue Code of 1986, or section 2203(2) of the Public Health Service Act, except for the voluntary termination of such individual's employment by such individual; and
"(B) elects such coverage.
"(4)
"(A)
"(i) an individual who does not have an election of COBRA continuation coverage in effect on the first day of the first month beginning after the date of the enactment of this Act but who would be an assistance eligible individual described in paragraph (3) if such election were so in effect; or
"(ii) an individual who elected COBRA continuation coverage and discontinued from such coverage before the first day of the first month beginning after the date of the enactment of this Act [Mar. 11, 2021],
such individual may elect the COBRA continuation coverage under the COBRA continuation coverage provisions containing such provisions during the period beginning on the first day of the first month beginning after the date of the enactment of this Act and ending 60 days after the date on which the notification required under paragraph (5)(C) is provided to such individual.
"(B)
"(i) shall commence (including for purposes of applying the treatment of premium payments under paragraph (1)(A) and any cost-sharing requirements for items and services under a group health plan) with the first period of coverage beginning on or after the first day of the first month beginning after the date of the enactment of this Act, and
"(ii) shall not extend beyond the period of COBRA continuation coverage that would have been required under the applicable COBRA continuation coverage provision if the coverage had been elected as required under such provision or had not been discontinued.
"(5)
"(A)
"(i)
"(I) the availability of premium assistance with respect to such coverage under this subsection; and
"(II) the option to enroll in different coverage if the employer permits assistance eligible individuals described in paragraph (3) to elect enrollment in different coverage (as described in paragraph (1)(B)).
"(ii)
"(iii)
"(B)
"(i) the forms necessary for establishing eligibility for premium assistance under this subsection;
"(ii) the name, address, and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with such premium assistance;
"(iii) a description of the extended election period provided for in paragraph (4)(A);
"(iv) a description of the obligation of the qualified beneficiary under paragraph (2)(B) and the penalty provided under section 6720C of the Internal Revenue Code of 1986 for failure to carry out the obligation;
"(v) a description, displayed in a prominent manner, of the qualified beneficiary's right to a subsidized premium and any conditions on entitlement to the subsidized premium; and
"(vi) a description of the option of the qualified beneficiary to enroll in different coverage if the employer permits such beneficiary to elect to enroll in such different coverage under paragraph (1)(B).
"(C)
"(D)
"(6)
"(A)
"(i) that the premium assistance for such individual will expire soon and the prominent identification of the date of such expiration; and
"(ii) that such individual may be eligible for coverage without any premium assistance through—
"(I) COBRA continuation coverage; or
"(II) coverage under a group health plan.
"(B)
"(C)
"(D)
"(7)
"(8)
"(A)
"(B)
"(9)
"(A)
"(B)
"(C)
"(D)
"(E)
"(F)
"(G)
"(H)
"(I)
"(J)
"(10)
Special Rule in Case of Employee Payment That Is Not Required
"(i)
"(ii)
"(iii)
[For definition of "assistance eligible individual", period of coverage" and "premium" as used in section 9501(b)(1)(D) of
Notification of Changes in Continuation Coverage
§4980C. Requirements for issuers of qualified long-term care insurance contracts
(a) General rule
There is hereby imposed on any person failing to meet the requirements of subsection (c) or (d) a tax in the amount determined under subsection (b).
(b) Amount
(1) In general
The amount of the tax imposed by subsection (a) shall be $100 per insured for each day any requirement of subsection (c) or (d) is not met with respect to each qualified long-term care insurance contract.
(2) Waiver
In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that payment of the tax would be excessive relative to the failure involved.
(c) Responsibilities
The requirements of this subsection are as follows:
(1) Requirements of model provisions
(A) Model regulation
The following requirements of the model regulation must be met:
(i) Section 13 (relating to application forms and replacement coverage).
(ii) Section 14 (relating to reporting requirements), except that the issuer shall also report at least annually the number of claims denied during the reporting period for each class of business (expressed as a percentage of claims denied), other than claims denied for failure to meet the waiting period or because of any applicable preexisting condition.
(iii) Section 20 (relating to filing requirements for marketing).
(iv) Section 21 (relating to standards for marketing), including inaccurate completion of medical histories, other than sections 21C(1) and 21C(6) thereof, except that—
(I) in addition to such requirements, no person shall, in selling or offering to sell a qualified long-term care insurance contract, misrepresent a material fact; and
(II) no such requirements shall include a requirement to inquire or identify whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance.
(v) Section 22 (relating to appropriateness of recommended purchase).
(vi) Section 24 (relating to standard format outline of coverage).
(vii) Section 25 (relating to requirement to deliver shopper's guide).
(B) Model Act
The following requirements of the model Act must be met:
(i) Section 6F (relating to right to return), except that such section shall also apply to denials of applications and any refund shall be made within 30 days of the return or denial.
(ii) Section 6G (relating to outline of coverage).
(iii) Section 6H (relating to requirements for certificates under group plans).
(iv) Section 6I (relating to policy summary).
(v) Section 6J (relating to monthly reports on accelerated death benefits).
(vi) Section 7 (relating to incontestability period).
(C) Definitions
For purposes of this paragraph, the terms "model regulation" and "model Act" have the meanings given such terms by section 7702B(g)(2)(B).
(2) Delivery of policy
If an application for a qualified long-term care insurance contract (or for a certificate under such a contract for a group) is approved, the issuer shall deliver to the applicant (or policyholder or certificateholder) the contract (or certificate) of insurance not later than 30 days after the date of the approval.
(3) Information on denials of claims
If a claim under a qualified long-term care insurance contract is denied, the issuer shall, within 60 days of the date of a written request by the policyholder or certificateholder (or representative)—
(A) provide a written explanation of the reasons for the denial, and
(B) make available all information directly relating to such denial.
(d) Disclosure
The requirements of this subsection are met if the issuer of a long-term care insurance policy discloses in such policy and in the outline of coverage required under subsection (c)(1)(B)(ii) that the policy is intended to be a qualified long-term care insurance contract under section 7702B(b).
(e) Qualified long-term care insurance contract defined
For purposes of this section, the term "qualified long-term care insurance contract" has the meaning given such term by section 7702B.
(f) Coordination with State requirements
If a State imposes any requirement which is more stringent than the analogous requirement imposed by this section or section 7702B(g), the requirement imposed by this section or section 7702B(g) shall be treated as met if the more stringent State requirement is met.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
"(a)
"(b)
§4980D. Failure to meet certain group health plan requirements
(a) General rule
There is hereby imposed a tax on any failure of a group health plan to meet the requirements of
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure shall be $100 for each day in the noncompliance period with respect to each individual to whom such failure relates.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period" means, with respect to any failure, the period—
(A) beginning on the date such failure first occurs, and
(B) ending on the date such failure is corrected.
(3) Minimum tax for noncompliance period where failure discovered after notice of examination
Notwithstanding paragraphs (1) and (2) of subsection (c)—
(A) In general
In the case of 1 or more failures with respect to an individual—
(i) which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and
(ii) which occurred or continued during the period under examination,
the amount of tax imposed by subsection (a) by reason of such failures with respect to such individual shall not be less than the lesser of $2,500 or the amount of tax which would be imposed by subsection (a) without regard to such paragraphs.
(B) Higher minimum tax where violations are more than de minimis
To the extent violations for which any person is liable under subsection (e) for any year are more than de minimis, subparagraph (A) shall be applied by substituting "$15,000" for "$2,500" with respect to such person.
(C) Exception for church plans
This paragraph shall not apply to any failure under a church plan (as defined in section 414(e)).
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered exercising reasonable diligence
No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that the person otherwise liable for such tax did not know, and exercising reasonable diligence would not have known, that such failure existed.
(2) Tax not to apply to failures corrected within certain periods
No tax shall be imposed by subsection (a) on any failure if—
(A) such failure was due to reasonable cause and not to willful neglect, and
(B)(i) in the case of a plan other than a church plan (as defined in section 414(e)), such failure is corrected during the 30-day period beginning on the first date the person otherwise liable for such tax knew, or exercising reasonable diligence would have known, that such failure existed, and
(ii) in the case of a church plan (as so defined), such failure is corrected before the close of the correction period (determined under the rules of section 414(e)(4)(C)).
(3) Overall limitation for unintentional failures
In the case of failures which are due to reasonable cause and not to willful neglect—
(A) Single employer plans
(i) In general
In the case of failures with respect to plans other than specified multiple employer health plans, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—
(I) 10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or
(II) $500,000.
(ii) Taxable years in the case of certain controlled groups
For purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561.
(B) Specified multiple employer health plans
(i) In general
In the case of failures with respect to a specified multiple employer health plan, the tax imposed by subsection (a) for failures during the taxable year of the trust forming part of such plan shall not exceed the amount equal to the lesser of—
(I) 10 percent of the amount paid or incurred by such trust during such taxable year to provide medical care (as defined in section 9832(d)(3)) directly or through insurance, reimbursement, or otherwise, or
(II) $500,000.
For purposes of the preceding sentence, all plans of which the same trust forms a part shall be treated as one plan.
(ii) Special rule for employers required to pay tax
If an employer is assessed a tax imposed by subsection (a) by reason of a failure with respect to a specified multiple employer health plan, the limit shall be determined under subparagraph (A) (and not under this subparagraph) and as if such plan were not a specified multiple employer health plan.
(4) Waiver by Secretary
In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.
(d) Tax not to apply to certain insured small employer plans
(1) In general
In the case of a group health plan of a small employer which provides health insurance coverage solely through a contract with a health insurance issuer, no tax shall be imposed by this section on the employer on any failure (other than a failure attributable to section 9811) which is solely because of the health insurance coverage offered by such issuer.
(2) Small employer
(A) In general
For purposes of paragraph (1), the term "small employer" means, with respect to a calendar year and a plan year, an employer who employed an average of at least 2 but not more than 50 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan year. For purposes of the preceding sentence, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer.
(B) Employers not in existence in preceding year
In the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is a small employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.
(C) Predecessors
Any reference in this paragraph to an employer shall include a reference to any predecessor of such employer.
(3) Health insurance coverage; health insurance issuer
For purposes of paragraph (1), the terms "health insurance coverage" and "health insurance issuer" have the respective meanings given such terms by section 9832.
(e) Liability for tax
The following shall be liable for the tax imposed by subsection (a) on a failure:
(1) Except as otherwise provided in this subsection, the employer.
(2) In the case of a multiemployer plan, the plan.
(3) In the case of a failure under section 9803 (relating to guaranteed renewability) with respect to a plan described in subsection (f)(2)(B), the plan.
(f) Definitions
For purposes of this section—
(1) Group health plan
The term "group health plan" has the meaning given such term by section 9832(a).
(2) Specified multiple employer health plan
The term "specified multiple employer health plan" means a group health plan which is—
(A) any multiemployer plan, or
(B) any multiple employer welfare arrangement (as defined in section 3(40) of the Employee Retirement Income Security Act of 1974, as in effect on the date of the enactment of this section).
(3) Correction
A failure of a group health plan shall be treated as corrected if—
(A) such failure is retroactively undone to the extent possible, and
(B) the person to whom the failure relates is placed in a financial position which is as good as such person would have been in had such failure not occurred.
(Added
Editorial Notes
References in Text
Section 3(40) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (f)(2)(B), is classified to
The date of the enactment of this section, referred to in subsec. (f)(2)(B), is the date of enactment of
Amendments
2005—Subsec. (a).
1997—Subsec. (a).
Subsec. (c)(3)(B)(i)(I).
Subsec. (d)(1).
Subsec. (d)(3).
Subsec. (f)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Effective Date
§4980E. Failure of employer to make comparable Archer MSA contributions
(a) General rule
In the case of an employer who makes a contribution to the Archer MSA of any employee with respect to coverage under a high deductible health plan of the employer during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year.
(b) Amount of tax
The amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to Archer MSAs of employees for taxable years of such employees ending with or within such calendar year.
(c) Waiver by Secretary
In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.
(d) Employer required to make comparable MSA contributions for all participating employees
(1) In general
An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the Archer MSAs of all comparable participating employees for each coverage period during such calendar year.
(2) Comparable contributions
(A) In general
For purposes of paragraph (1), the term "comparable contributions" means contributions—
(i) which are the same amount, or
(ii) which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees.
(B) Part-year employees
In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the Archer MSA of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year.
(3) Comparable participating employees
For purposes of paragraph (1), the term "comparable participating employees" means all employees—
(A) who are eligible individuals covered under any high deductible health plan of the employer, and
(B) who have the same category of coverage.
For purposes of subparagraph (B), the categories of coverage are self-only and family coverage.
(4) Part-time employees
(A) In general
Paragraph (3) shall be applied separately with respect to part-time employees and other employees.
(B) Part-time employee
For purposes of subparagraph (A), the term "part-time employee" means any employee who is customarily employed for fewer than 30 hours per week.
(e) Controlled groups
For purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.
(f) Definitions
Terms used in this section which are also used in section 220 have the respective meanings given such terms in section 220.
(Added
Editorial Notes
Amendments
2002—
2000—Subsec. (a).
Subsecs. (b), (d)(1).
Subsec. (d)(2)(B).
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1996, see section 301(j) of
§4980F. Failure of applicable plans reducing benefit accruals to satisfy notice requirements
(a) Imposition of tax
There is hereby imposed a tax on the failure of any applicable pension plan to meet the requirements of subsection (e) with respect to any applicable individual.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure with respect to any applicable individual shall be $100 for each day in the noncompliance period with respect to such failure.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period" means, with respect to any failure, the period beginning on the date the failure first occurs and ending on the date the notice to which the failure relates is provided or the failure is otherwise corrected.
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered and reasonable diligence exercised
No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that any person subject to liability for the tax under subsection (d) did not know that the failure existed and exercised reasonable diligence to meet the requirements of subsection (e).
(2) Tax not to apply to failures corrected within 30 days
No tax shall be imposed by subsection (a) on any failure if—
(A) any person subject to liability for the tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), and
(B) such person provides the notice described in subsection (e) during the 30-day period beginning on the first date such person knew, or exercising reasonable diligence would have known, that such failure existed.
(3) Overall limitation for unintentional failures
(A) In general
If the person subject to liability for tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), the tax imposed by subsection (a) for failures during the taxable year of the employer (or, in the case of a multiemployer plan, the taxable year of the trust forming part of the plan) shall not exceed $500,000. For purposes of the preceding sentence, all multiemployer plans of which the same trust forms a part shall be treated as 1 plan.
(B) Taxable years in the case of certain controlled groups
For purposes of this paragraph, if all persons who are treated as a single employer for purposes of this section do not have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561.
(4) Waiver by Secretary
In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive or otherwise inequitable relative to the failure involved.
(d) Liability for tax
The following shall be liable for the tax imposed by subsection (a):
(1) In the case of a plan other than a multiemployer plan, the employer.
(2) In the case of a multiemployer plan, the plan.
(e) Notice requirements for plans significantly reducing benefit accruals
(1) In general
If an applicable pension plan is amended to provide for a significant reduction in the rate of future benefit accrual, the plan administrator shall provide the notice described in paragraph (2) to each applicable individual (and to each employee organization representing applicable individuals) and to each employer who has an obligation to contribute to the plan.
(2) Notice
The notice required by paragraph (1) shall be written in a manner calculated to be understood by the average plan participant and shall provide sufficient information (as determined in accordance with regulations prescribed by the Secretary) to allow applicable individuals to understand the effect of the plan amendment. The Secretary may provide a simplified form of notice for, or exempt from any notice requirement, a plan—
(A) which has fewer than 100 participants who have accrued a benefit under the plan, or
(B) which offers participants the option to choose between the new benefit formula and the old benefit formula.
(3) Timing of notice
Except as provided in regulations, the notice required by paragraph (1) shall be provided within a reasonable time before the effective date of the plan amendment.
(4) Designees
Any notice under paragraph (1) may be provided to a person designated, in writing, by the person to which it would otherwise be provided.
(5) Notice before adoption of amendment
A plan shall not be treated as failing to meet the requirements of paragraph (1) merely because notice is provided before the adoption of the plan amendment if no material modification of the amendment occurs before the amendment is adopted.
(f) Definitions and special rules
For purposes of this section—
(1) Applicable individual
The term "applicable individual" means, with respect to any plan amendment—
(A) each participant in the plan, and
(B) any beneficiary who is an alternate payee (within the meaning of section 414(p)(8)) under an applicable qualified domestic relations order (within the meaning of section 414(p)(1)(A)),
whose rate of future benefit accrual under the plan may reasonably be expected to be significantly reduced by such plan amendment.
(2) Applicable pension plan
The term "applicable pension plan" means—
(A) any defined benefit plan described in section 401(a) which includes a trust exempt from tax under section 501(a), or
(B) an individual account plan which is subject to the funding standards of section 412.
Such term shall not include a governmental plan (within the meaning of section 414(d)) or a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made.
(3) Early retirement
A plan amendment which eliminates or reduces any early retirement benefit or retirement-type subsidy (within the meaning of section 411(d)(6)(B)(i)) shall be treated as having the effect of reducing the rate of future benefit accrual.
(g) New technologies
The Secretary may by regulations allow any notice under subsection (e) to be provided by using new technologies.
(Added
Editorial Notes
Amendments
2006—Subsec. (e)(1).
2002—Subsec. (e)(1).
Subsec. (f)(2)(A).
Subsec. (f)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Effective Date of 2002 Amendment
Amendment by
Effective Date
"(1)
"(2)
"(3)
"(A)
"(B)
§4980G. Failure of employer to make comparable health savings account contributions
(a) General rule
In the case of an employer who makes a contribution to the health savings account of any employee during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (b) for such calendar year.
(b) Rules and requirements
Rules and requirements similar to the rules and requirements of section 4980E shall apply for purposes of this section.
(c) Regulations
The Secretary shall issue regulations to carry out the purposes of this section, including regulations providing special rules for employers who make contributions to Archer MSAs and health savings accounts during the calendar year.
(d) Exception
For purposes of applying section 4980E to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.
(Added
Editorial Notes
Amendments
2006—Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2003, see section 1201(k) of
§4980H. Shared responsibility for employers regarding health coverage
(a) Large employers not offering health coverage
If—
(1) any applicable large employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and
(2) at least one full-time employee of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,
then there is hereby imposed on the employer an assessable payment equal to the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month.
(b) Large employers offering coverage with employees who qualify for premium tax credits or cost-sharing reductions
(1) In general
If—
(A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and
(B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,
then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1/12 of $3,000.
(2) Overall limitation
The aggregate amount of tax determined under paragraph (1) with respect to all employees of an applicable large employer for any month shall not exceed the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month.
(c) Definitions and special rules
For purposes of this section—
(1) Applicable payment amount
The term "applicable payment amount" means, with respect to any month, 1/12 of $2,000.
(2) Applicable large employer
(A) In general
The term "applicable large employer" means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.
(B) Exemption for certain employers
(i) In general
An employer shall not be considered to employ more than 50 full-time employees if—
(I) the employer's workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and
(II) the employees in excess of 50 employed during such 120-day period were seasonal workers.
(ii) Definition of seasonal workers
The term "seasonal worker" means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons.
(C) Rules for determining employer size
For purposes of this paragraph—
(i) Application of aggregation rule for employers
All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as 1 employer.
(ii) Employers not in existence in preceding year
In the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is an applicable large employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.
(iii) Predecessors
Any reference in this subsection to an employer shall include a reference to any predecessor of such employer.
(D) Application of employer size to assessable penalties
(i) In general
The number of individuals employed by an applicable large employer as full-time employees during any month shall be reduced by 30 solely for purposes of calculating—
(I) the assessable payment under subsection (a), or
(II) the overall limitation under subsection (b)(2).
(ii) Aggregation
In the case of persons treated as 1 employer under subparagraph (C)(i), only 1 reduction under subclause (I) or (II) 1 shall be allowed with respect to such persons and such reduction shall be allocated among such persons ratably on the basis of the number of full-time employees employed by each such person.
(E) Full-time equivalents treated as full-time employees
Solely for purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.
(F) Exemption for health coverage under TRICARE or the Department of Veterans Affairs
Solely for purposes of determining whether an employer is an applicable large employer under this paragraph for any month, an individual shall not be taken into account as an employee for such month if such individual has medical coverage for such month under—
(i)
(ii) under a health care program under
(3) Applicable premium tax credit and cost-sharing reduction
The term "applicable premium tax credit and cost-sharing reduction" means—
(A) any premium tax credit allowed under section 36B,
(B) any cost-sharing reduction under section 1402 of the Patient Protection and Affordable Care Act, and
(C) any advance payment of such credit or reduction under section 1412 of such Act.
(4) Full-time employee
(A) In general
The term "full-time employee" means, with respect to any month, an employee who is employed on average at least 30 hours of service per week.
(B) Hours of service
The Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis.
(5) Inflation adjustment
(A) In general
In the case of any calendar year after 2014, each of the dollar amounts in subsection (b) and paragraph (1) shall be increased by an amount equal to the product of—
(i) such dollar amount, and
(ii) the premium adjustment percentage (as defined in section 1302(c)(4) of the Patient Protection and Affordable Care Act) for the calendar year.
(B) Rounding
If the amount of any increase under subparagraph (A) is not a multiple of $10, such increase shall be rounded to the next lowest multiple of $10.
(6) Other definitions
Any term used in this section which is also used in the Patient Protection and Affordable Care Act shall have the same meaning as when used in such Act.
(7) Tax nondeductible
For denial of deduction for the tax imposed by this section, see section 275(a)(6).
(d) Administration and procedure
(1) In general
Any assessable payment provided by this section shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of
(2) Time for payment
The Secretary may provide for the payment of any assessable payment provided by this section on an annual, monthly, or other periodic basis as the Secretary may prescribe.
(3) Coordination with credits, etc.
The Secretary shall prescribe rules, regulations, or guidance for the repayment of any assessable payment (including interest) if such payment is based on the allowance or payment of an applicable premium tax credit or cost-sharing reduction with respect to an employee, such allowance or payment is subsequently disallowed, and the assessable payment would not have been required to be made but for such allowance or payment.
(Added and amended
Editorial Notes
References in Text
The Patient Protection and Affordable Care Act, referred to in subsecs. (a)(2), (b)(1)(B), and (c)(3)(B), (C), (5)(A)(ii), (6), is
Amendments
2018—Subsec. (c)(2)(F).
2015—Subsec. (c)(2)(F).
2011—Subsec. (b)(3).
2010—Subsec. (b).
Subsec. (c).
Subsec. (c)(1).
Subsec. (c)(3).
Subsec. (d).
Subsec. (d)(1).
Subsec. (d)(2)(D).
"(i) subparagraph (A) shall be applied by substituting 'who employed an average of at least 5 full-time employees on business days during the preceding calendar year and whose annual payroll expenses exceed $250,000 for such preceding calendar year' for 'who employed an average of at least 50 full-time employees on business days during the preceding calendar year', and
"(ii) subparagraph (B) shall be applied by substituting '5' for '50'."
Subsec. (d)(2)(E).
Subsec. (d)(4)(A).
Subsec. (d)(5)(A).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2015 Amendment
Effective Date of 2011 Amendment
Amendment by
Effective Date of 2010 Amendment
Effective Date
1 So in original. Probably means subclause (I) or (II) of clause (i).
[§4980I. Repealed. Pub. L. 116–94, div. N, title I, §503(a), Dec. 20, 2019, 133 Stat. 3119 ]
Section, added and amended
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 2019, see section 503(c) of
CHAPTER 44 —QUALIFIED INVESTMENT ENTITIES
Editorial Notes
Amendments
1986—
1976—
§4981. Excise tax on undistributed income of real estate investment trusts
(a) Imposition of tax
There is hereby imposed a tax on every real estate investment trust for each calendar year equal to 4 percent of the excess (if any) of—
(1) the required distribution for such calendar year, over
(2) the distributed amount for such calendar year.
(b) Required distribution
For purposes of this section—
(1) In general
The term "required distribution" means, with respect to any calendar year, the sum of—
(A) 85 percent of the real estate investment trust's ordinary income for such calendar year, plus
(B) 95 percent of the real estate investment trust's capital gain net income for such calendar year.
(2) Increase by prior year shortfall
The amount determined under paragraph (1) for any calendar year shall be increased by the excess (if any) of—
(A) the grossed up required distribution for the preceding calendar year, over
(B) the distributed amount for such preceding calendar year.
(3) Grossed up required distribution
The grossed up required distribution for any calendar year is the required distribution for such year determined—
(A) with the application of paragraph (2) to such taxable year, and
(B) by substituting "100 percent" for each percentage set forth in paragraph (1).
(c) Distributed amount
For purposes of this section—
(1) In general
The term "distributed amount" means, with respect to any calendar year, the sum of—
(A) the deduction for dividends paid (as defined in section 561) during such calendar year (but computed without regard to that portion of such deduction which is attributable to the amount excluded under section 857(b)(2)(D)), and
(B) any amount on which tax is imposed under subsection (b)(1) or (b)(3)(A) 1 of section 857 for any taxable year ending in such calendar year.
(2) Increase by prior year overdistribution
The amount determined under paragraph (1) for any calendar year shall be increased by the excess (if any) of—
(A) the distributed amount for the preceding calendar year (determined with the application of this paragraph to such preceding calendar year), over
(B) the grossed up required distribution for such preceding calendar year.
(3) Determination of dividends paid
The amount of the dividends paid during any calendar year shall be determined without regard to the provisions of section 858.
(d) Time for payment of tax
The tax imposed by this section for any calendar year shall be paid on or before March 15 of the following calendar year.
(e) Definitions and special rules
For purposes of this section—
(1) Ordinary income
The term "ordinary income" means the real estate investment trust taxable income (as defined in section 857(b)(2)) determined—
(A) without regard to subparagraph (B) of section 857(b)(2),
(B) by not taking into account any gain or loss from the sale or exchange of a capital asset, and
(C) by treating the calendar year as the trust's taxable year.
(2) Capital gain net income
(A) In general
The term "capital gain net income" has the meaning given such term by section 1222(9) (determined by treating the calendar year as the trust's taxable year).
(B) Reduction for net ordinary loss
The amount determined under subparagraph (A) shall be reduced by the amount of the trust's net ordinary loss for the taxable year.
(C) Net ordinary loss
For purposes of this paragraph, the net ordinary loss for the calendar year is the amount which would be net operating loss of the trust for the calendar year if the amount of such loss were determined in the same manner as ordinary income is determined under paragraph (1).
(3) Treatment of deficiency distributions
In the case of any deficiency dividend (as defined in section 860(f))—
(A) such dividend shall be taken into account when paid without regard to section 860, and
(B) any income giving rise to the adjustment shall be treated as arising when the dividend is paid.
(Added
Editorial Notes
References in Text
Subsection (b)(3)(A) of section 857, referred to in subsec. (c)(1)(B), was repealed and subsection (b)(3)(B) was redesignated (b)(3)(A) by
Amendments
1988—Subsec. (c)(1)(A).
Subsec. (e)(2).
1986—
Statutory Notes and Related Subsidiaries
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
1 See References in Text note below.
§4982. Excise tax on undistributed income of regulated investment companies
(a) Imposition of tax
There is hereby imposed a tax on every regulated investment company for each calendar year equal to 4 percent of the excess (if any) of—
(1) the required distribution for such calendar year, over
(2) the distributed amount for such calendar year.
(b) Required distribution
For purposes of this section—
(1) In general
The term "required distribution" means, with respect to any calendar year, the sum of—
(A) 98 percent of the regulated investment company's ordinary income for such calendar year, plus
(B) 98.2 percent of the regulated investment company's capital gain net income for the 1-year period ending on October 31 of such calendar year.
(2) Increase by prior year shortfall
The amount determined under paragraph (1) for any calendar year shall be increased by the excess (if any) of—
(A) the grossed up required distribution for the preceding calendar year, over
(B) the distributed amount for such preceding calendar year.
(3) Grossed up required distribution
The grossed up required distribution for any calendar year is the required distribution for such year determined—
(A) with the application of paragraph (2) to such taxable year, and
(B) by substituting "100 percent" for each percentage set forth in paragraph (1).
(c) Distributed amount
For purposes of this section—
(1) In general
The term "distributed amount" means, with respect to any calendar year, the sum of—
(A) the deduction for dividends paid (as defined in section 561) during such calendar year, and
(B) any amount on which tax is imposed under subsection (b)(1) or (b)(3)(A) of section 852 for any taxable year ending in such calendar year.
(2) Increase by prior year overdistribution
The amount determined under paragraph (1) for any calendar year shall be increased by the excess (if any) of—
(A) the distributed amount for the preceding calendar year (determined with the application of this paragraph to such preceding calendar year), over
(B) the grossed up required distribution for such preceding calendar year.
(3) Determination of dividends paid
The amount of the dividends paid during any calendar year shall be determined without regard to—
(A) the provisions of section 855, and
(B) any exempt-interest dividend as defined in section 852(b)(5).
(4) Special rule for estimated tax payments
(A) In general
In the case of a regulated investment company which elects the application of this paragraph for any calendar year—
(i) the distributed amount with respect to such company for such calendar year shall be increased by the amount on which qualified estimated tax payments are made by such company during such calendar year, and
(ii) the distributed amount with respect to such company for the following calendar year shall be reduced by the amount of such increase.
(B) Qualified estimated tax payments
For purposes of this paragraph, the term "qualified estimated tax payments" means, with respect to any calendar year, payments of estimated tax of a tax described in paragraph (1)(B) for any taxable year which begins (but does not end) in such calendar year.
(d) Time for payment of tax
The tax imposed by this section for any calendar year shall be paid on or before March 15 of the following calendar year.
(e) Definitions and special rules
For purposes of this section—
(1) Ordinary income
The term "ordinary income" means the investment company taxable income (as defined in section 852(b)(2)) determined—
(A) without regard to subparagraphs (A) and (D) of section 852(b)(2),
(B) by not taking into account any gain or loss from the sale or exchange of a capital asset, and
(C) by treating the calendar year as the company's taxable year.
(2) Capital gain net income
(A) In general
Except as provided in subparagraph (B), the term "capital gain net income" has the meaning given such term by section 1222(9) (determined by treating the 1-year period ending on October 31 of any calendar year as the company's taxable year).
(B) Reduction by net ordinary loss for calendar year
The amount determined under subparagraph (A) shall be reduced (but not below the net capital gain) by the amount of the company's net ordinary loss for the calendar year.
(C) Definitions
For purposes of this paragraph—
(i) Net capital gain
The term "net capital gain" has the meaning given such term by section 1222(11) (determined by treating the 1-year period ending on October 31 of the calendar year as the company's taxable year).
(ii) Net ordinary loss
The net ordinary loss for the calendar year is the amount which would be the net operating loss of the company for the calendar year if the amount of such loss were determined in the same manner as ordinary income is determined under paragraph (1).
(3) Treatment of deficiency distributions
In the case of any deficiency dividend (as defined in section 860(f))—
(A) such dividend shall be taken into account when paid without regard to section 860, and
(B) any income giving rise to the adjustment shall be treated as arising when the dividend is paid.
(4) Election to use taxable year in certain cases
(A) In general
If—
(i) the taxable year of the regulated investment company ends with the month of November or December, and
(ii) such company makes an election under this paragraph,
subsection (b)(1)(B) and paragraph (2) of this subsection shall be applied by taking into account the company's taxable year in lieu of the 1-year period ending on October 31 of the calendar year.
(B) Election revocable only with consent
An election under this paragraph, once made, may be revoked only with the consent of the Secretary.
(5) Treatment of specified gains and losses after October 31 of calendar year
(A) In general
Any specified gain or specified loss which (but for this paragraph) would be properly taken into account for the portion of the calendar year after October 31 shall be treated as arising on January 1 of the following calendar year.
(B) Specified gains and losses
For purposes of this paragraph—
(i) Specified gain
The term "specified gain" means ordinary gain from the sale, exchange, or other disposition of property (including the termination of a position with respect to such property). Such term shall include any foreign currency gain attributable to a section 988 transaction (within the meaning of section 988) and any amount includible in gross income under section 1296(a)(1).
(ii) Specified loss
The term "specified loss" means ordinary loss from the sale, exchange, or other disposition of property (including the termination of a position with respect to such property). Such term shall include any foreign currency loss attributable to a section 988 transaction (within the meaning of section 988) and any amount allowable as a deduction under section 1296(a)(2).
(C) Special rule for companies electing to use the taxable year
In the case of any company making an election under paragraph (4), subparagraph (A) shall be applied by substituting the last day of the company's taxable year for October 31.
(6) Treatment of mark to market gain
(A) In general
For purposes of determining a regulated investment company's ordinary income, notwithstanding paragraph (1)(C), each specified mark to market provision shall be applied as if such company's taxable year ended on October 31. In the case of a company making an election under paragraph (4), the preceding sentence shall be applied by substituting the last day of the company's taxable year for October 31.
(B) Specified mark to market provision
For purposes of this paragraph, the term "specified mark to market provision" means sections 1256 and 1296 and any other provision of this title (or regulations thereunder) which treats property as disposed of on the last day of the taxable year or which determines income by reference to the value of an item on the last day of the taxable year.
(7) Elective deferral of certain ordinary losses
Except as provided in regulations prescribed by the Secretary, in the case of a regulated investment company which has a taxable year other than the calendar year—
(A) such company may elect to determine its ordinary income and net ordinary loss (as defined in paragraph (2)(C)(ii)) for the calendar year without regard to any portion of any net ordinary loss (determined without regard to specified gains and losses taken into account under paragraph (5)) which is attributable to the portion of such calendar year which is after the beginning of the taxable year which begins in such calendar year, and
(B) any amount of net ordinary loss not taken into account for a calendar year by reason of subparagraph (A) shall be treated as arising on the 1st day of the following calendar year.
(f) Exception for certain regulated investment companies
This section shall not apply to any regulated investment company for any calendar year if at all times during such calendar year each shareholder in such company was—
(1) a trust described in section 401(a) and exempt from tax under section 501(a),
(2) a segregated asset account of a life insurance company held in connection with variable contracts (as defined in section 817(d)),
(3) any other tax-exempt entity whose ownership of beneficial interests in the company would not preclude the application of section 817(h)(4), or
(4) another regulated investment company described in this subsection.
For purposes of the preceding sentence, any shares attributable to an investment in the regulated investment company (not exceeding $250,000) made in connection with the organization of such company shall not be taken into account.
(Added
Editorial Notes
Amendments
2014—Subsec. (e)(6)(B).
Subsec. (e)(7)(A).
Subsec. (f)(2).
2010—Subsec. (b)(1)(B).
Subsec. (c)(4).
Subsec. (e)(5) to (7).
Subsec. (f).
Subsec. (f)(3), (4).
1997—Subsec. (e)(6).
1989—Subsec. (b)(1)(A).
1988—Subsec. (e)(2).
Subsec. (e)(5).
Subsec. (f).
1987—Subsec. (b)(1)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by section 205(d) of
Effective Date of 2010 Amendment
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1989 Amendment
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
Effective Date
CHAPTER 45 —PROVISIONS RELATING TO EXPATRIATED ENTITIES
Editorial Notes
Prior Provisions
A prior
§4985. Stock compensation of insiders in expatriated corporations
(a) Imposition of tax
In the case of an individual who is a disqualified individual with respect to any expatriated corporation, there is hereby imposed on such person a tax equal to—
(1) the rate of tax specified in section 1(h)(1)(D), multiplied by
(2) the value (determined under subsection (b)) of the specified stock compensation held (directly or indirectly) by or for the benefit of such individual or a member of such individual's family (as defined in section 267) at any time during the 12-month period beginning on the date which is 6 months before the expatriation date.
(b) Value
For purposes of subsection (a)—
(1) In general
The value of specified stock compensation shall be—
(A) in the case of a stock option (or other similar right) or a stock appreciation right, the fair value of such option or right, and
(B) in any other case, the fair market value of such compensation.
(2) Date for determining value
The determination of value shall be made—
(A) in the case of specified stock compensation held on the expatriation date, on such date,
(B) in the case of such compensation which is canceled during the 6 months before the expatriation date, on the day before such cancellation, and
(C) in the case of such compensation which is granted after the expatriation date, on the date such compensation is granted.
(c) Tax to apply only if shareholder gain recognized
Subsection (a) shall apply to any disqualified individual with respect to an expatriated corporation only if gain (if any) on any stock in such corporation is recognized in whole or part by any shareholder by reason of the acquisition referred to in section 7874(a)(2)(B)(i) with respect to such corporation.
(d) Exception where gain recognized on compensation
Subsection (a) shall not apply to—
(1) any stock option which is exercised on the expatriation date or during the 6-month period before such date and to the stock acquired in such exercise, if income is recognized under section 83 on or before the expatriation date with respect to the stock acquired pursuant to such exercise, and
(2) any other specified stock compensation which is exercised, sold, exchanged, distributed, cashed-out, or otherwise paid during such period in a transaction in which income, gain, or loss is recognized in full.
(e) Definitions
For purposes of this section—
(1) Disqualified individual
The term "disqualified individual" means, with respect to a corporation, any individual who, at any time during the 12-month period beginning on the date which is 6 months before the expatriation date—
(A) is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to such corporation or any member of the expanded affiliated group which includes such corporation, or
(B) would be subject to such requirements if such corporation or member were an issuer of equity securities referred to in such section.
(2) Expatriated corporation; expatriation date
(A) Expatriated corporation
The term "expatriated corporation" means any corporation which is an expatriated entity (as defined in section 7874(a)(2)). Such term includes any predecessor or successor of such a corporation.
(B) Expatriation date
The term "expatriation date" means, with respect to a corporation, the date on which the corporation first becomes an expatriated corporation.
(3) Specified stock compensation
(A) In general
The term "specified stock compensation" means payment (or right to payment) granted by the expatriated corporation (or by any member of the expanded affiliated group which includes such corporation) to any person in connection with the performance of services by a disqualified individual for such corporation or member if the value of such payment or right is based on (or determined by reference to) the value (or change in value) of stock in such corporation (or any such member).
(B) Exceptions
Such term shall not include—
(i) any option to which part II of subchapter D of
(ii) any payment or right to payment from a plan referred to in section 280G(b)(6).
(4) Expanded affiliated group
The term "expanded affiliated group" means an affiliated group (as defined in section 1504(a) without regard to section 1504(b)(3)); except that section 1504(a) shall be applied by substituting "more than 50 percent" for "at least 80 percent" each place it appears.
(f) Special rules
For purposes of this section—
(1) Cancellation of restriction
The cancellation of a restriction which by its terms will never lapse shall be treated as a grant.
(2) Payment or reimbursement of tax by corporation treated as specified stock compensation
Any payment of the tax imposed by this section directly or indirectly by the expatriated corporation or by any member of the expanded affiliated group which includes such corporation—
(A) shall be treated as specified stock compensation, and
(B) shall not be allowed as a deduction under any provision of
(3) Certain restrictions ignored
Whether there is specified stock compensation, and the value thereof, shall be determined without regard to any restriction other than a restriction which by its terms will never lapse.
(4) Property transfers
Any transfer of property shall be treated as a payment and any right to a transfer of property shall be treated as a right to a payment.
(5) Other administrative provisions
For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.
(g) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
(Added
Editorial Notes
References in Text
Section 16(a) of the Securities Exchange Act of 1934, referred to in subsec. (e)(1)(A), is classified to
Prior Provisions
Prior sections 4986 to 4998 were repealed by
Section 4986, added
Section 4987, added
Section 4988, added
Section 4989, added
Section 4990, added
Section 4991, added
Section 4992, added
Section 4993, added
Section 4994, added
Section 4995, added
Section 4996, added
Section 4997, added
Section 4998, added
Amendments
2017—Subsec. (a)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date
CHAPTER 46 —GOLDEN PARACHUTE PAYMENTS
§4999. Golden parachute payments
(a) Imposition of tax
There is hereby imposed on any person who receives an excess parachute payment a tax equal to 20 percent of the amount of such payment.
(b) Excess parachute payment defined
For purposes of this section, the term "excess parachute payment" has the meaning given to such term by section 280G(b).
(c) Administrative provisions
(1) Withholding
In the case of any excess parachute payment which is wages (within the meaning of section 3401) the amount deducted and withheld under section 3402 shall be increased by the amount of the tax imposed by this section on such payment.
(2) Other administrative provisions
For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to payments under agreements entered into or renewed after June 14, 1984, in taxable years ending after such date, with contracts entered into before June 15, 1984, which are amended after June 14, 1984, in any significant relevant aspect to be treated as a contract entered into after June 14, 1984, see section 67(e) of
CHAPTER 47 —CERTAIN GROUP HEALTH PLANS
Editorial Notes
Amendments
1989—
§5000. Certain group health plans
(a) Imposition of tax
There is hereby imposed on any employer (including a self-employed person) or employee organization that contributes to a nonconforming group health plan a tax equal to 25 percent of the employer's or employee organization's expenses incurred during the calendar year for each group health plan to which the employer or employee organization contributes.
(b) Group health plan and large group health plan
For purposes of this section—
(1) Group health plan
The term "group health plan" means a plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families.
(2) Large group health plan
The term "large group health plan" means a plan of, or contributed to by, an employer or employee organization (including a self-insured plan) to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families, that covers employees of at least one employer that normally employed at least 100 employees on a typical business day during the previous calendar year. For purposes of the preceding sentence—
(A) all employers treated as a single employer under subsection (a) or (b) of section 52 shall be treated as a single employer,
(B) all employees of the members of an affiliated service group (as defined in section 414(m)) shall be treated as employed by a single employer, and
(C) leased employees (as defined in section 414(n)(2)) shall be treated as employees of the person for whom they perform services to the extent they are so treated under section 414(n).
(c) Nonconforming group health plan
For purposes of this section, the term "nonconforming group health plan" means a group health plan or large group health plan that at any time during a calendar year does not comply with the requirements of subparagraphs (A) and (C) or subparagraph (B), respectively, of paragraph (1), or with the requirements of paragraph (2), of section 1862(b) of the Social Security Act.
(d) Government entities
For purposes of this section, the term "employer" does not include a Federal or other governmental entity.
(Added
Editorial Notes
References in Text
Section 1862(b) of the Social Security Act, referred to in subsec. (c), is classified to
Amendments
1993—Subsec. (a).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c).
1989—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1993 Amendment
Effective Date of 1989 Amendment
Amendment by
Effective Date
Section applicable to items and services furnished on or after Jan. 1, 1987, see section 9319(f) of
CHAPTER 48 —MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE
§5000A. Requirement to maintain minimum essential coverage
(a) Requirement to maintain minimum essential coverage
An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.
(b) Shared responsibility payment
(1) In general
If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).
(2) Inclusion with return
Any penalty imposed by this section with respect to any month shall be included with a taxpayer's return under
(3) Payment of penalty
If an individual with respect to whom a penalty is imposed by this section for any month—
(A) is a dependent (as defined in section 152) of another taxpayer for the other taxpayer's taxable year including such month, such other taxpayer shall be liable for such penalty, or
(B) files a joint return for the taxable year including such month, such individual and the spouse of such individual shall be jointly liable for such penalty.
(c) Amount of penalty
(1) In general
The amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to failures described in subsection (b)(1) shall be equal to the lesser of—
(A) the sum of the monthly penalty amounts determined under paragraph (2) for months in the taxable year during which 1 or more such failures occurred, or
(B) an amount equal to the national average premium for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years beginning in the calendar year with or within which the taxable year ends.
(2) Monthly penalty amounts
For purposes of paragraph (1)(A), the monthly penalty amount with respect to any taxpayer for any month during which any failure described in subsection (b)(1) occurred is an amount equal to 1/12 of the greater of the following amounts:
(A) Flat dollar amount
An amount equal to the lesser of—
(i) the sum of the applicable dollar amounts for all individuals with respect to whom such failure occurred during such month, or
(ii) 300 percent of the applicable dollar amount (determined without regard to paragraph (3)(C)) for the calendar year with or within which the taxable year ends.
(B) Percentage of income
An amount equal to the following percentage of the excess of the taxpayer's household income for the taxable year over the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer for the taxable year:
(i) 1.0 percent for taxable years beginning in 2014.
(ii) 2.0 percent for taxable years beginning in 2015.
(iii) Zero percent for taxable years beginning after 2015.
(3) Applicable dollar amount
For purposes of paragraph (1)—
(A) In general
Except as provided in subparagraphs (B) and (C), the applicable dollar amount is $0.
(B) Phase in
The applicable dollar amount is $95 for 2014 and $325 for 2015.
(C) Special rule for individuals under age 18
If an applicable individual has not attained the age of 18 as of the beginning of a month, the applicable dollar amount with respect to such individual for the month shall be equal to one-half of the applicable dollar amount for the calendar year in which the month occurs.
(4) Terms relating to income and families
For purposes of this section—
(A) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.
(B) Household income
The term "household income" means, with respect to any taxpayer for any taxable year, an amount equal to the sum of—
(i) the modified adjusted gross income of the taxpayer, plus
(ii) the aggregate modified adjusted gross incomes of all other individuals who—
(I) were taken into account in determining the taxpayer's family size under paragraph (1), and
(II) were required to file a return of tax imposed by section 1 for the taxable year.
(C) Modified adjusted gross income
The term "modified adjusted gross income" means adjusted gross income increased by—
(i) any amount excluded from gross income under section 911, and
(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.
(d) Applicable individual
For purposes of this section—
(1) In general
The term "applicable individual" means, with respect to any month, an individual other than an individual described in paragraph (2), (3), or (4).
(2) Religious exemptions
(A) Religious conscience exemptions
(i) In general
Such term shall not include any individual for any month if such individual has in effect an exemption under section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act which certifies that—
(I) such individual is a member of a recognized religious sect or division thereof which is described in section 1402(g)(1), and is adherent of established tenets or teachings of such sect or division as described in such section; or
(II) such individual is a member of a religious sect or division thereof which is not described in section 1402(g)(1), who relies solely on a religious method of healing, and for whom the acceptance of medical health services would be inconsistent with the religious beliefs of the individual.
(ii) Special rules
(I) Medical health services defined
For purposes of this subparagraph, the term "medical health services" does not include routine dental, vision and hearing services, midwifery services, vaccinations, necessary medical services provided to children, services required by law or by a third party, and such other services as the Secretary of Health and Human Services may provide in implementing section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act.
(II) Attestation required
Clause (i)(II) shall apply to an individual for months in a taxable year only if the information provided by the individual under section 1411(b)(5)(A) of such Act includes an attestation that the individual has not received medical health services during the preceding taxable year.
(B) Health care sharing ministry
(i) In general
Such term shall not include any individual for any month if such individual is a member of a health care sharing ministry for the month.
(ii) Health care sharing ministry
The term "health care sharing ministry" means an organization—
(I) which is described in section 501(c)(3) and is exempt from taxation under section 501(a),
(II) members of which share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the State in which a member resides or is employed,
(III) members of which retain membership even after they develop a medical condition,
(IV) which (or a predecessor of which) has been in existence at all times since December 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least December 31, 1999, and
(V) which conducts an annual audit which is performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and which is made available to the public upon request.
(3) Individuals not lawfully present
Such term shall not include an individual for any month if for the month the individual is not a citizen or national of the United States or an alien lawfully present in the United States.
(4) Incarcerated individuals
Such term shall not include an individual for any month if for the month the individual is incarcerated, other than incarceration pending the disposition of charges.
(e) Exemptions
No penalty shall be imposed under subsection (a) with respect to—
(1) Individuals who cannot afford coverage
(A) In general
Any applicable individual for any month if the applicable individual's required contribution (determined on an annual basis) for coverage for the month exceeds 8 percent of such individual's household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act. For purposes of applying this subparagraph, the taxpayer's household income shall be increased by any exclusion from gross income for any portion of the required contribution made through a salary reduction arrangement.
(B) Required contribution
For purposes of this paragraph, the term "required contribution" means—
(i) in the case of an individual eligible to purchase minimum essential coverage consisting of coverage through an eligible-employer-sponsored plan, the portion of the annual premium which would be paid by the individual (without regard to whether paid through salary reduction or otherwise) for self-only coverage, or
(ii) in the case of an individual eligible only to purchase minimum essential coverage described in subsection (f)(1)(C), the annual premium for the lowest cost bronze plan available in the individual market through the Exchange in the State in the rating area in which the individual resides (without regard to whether the individual purchased a qualified health plan through the Exchange), reduced by the amount of the credit allowable under section 36B for the taxable year (determined as if the individual was covered by a qualified health plan offered through the Exchange for the entire taxable year).
(C) Special rules for individuals related to employees
For purposes of subparagraph (B)(i), if an applicable individual is eligible for minimum essential coverage through an employer by reason of a relationship to an employee, the determination under subparagraph (A) shall be made by reference to 1 required contribution of the employee.
(D) Indexing
In the case of plan years beginning in any calendar year after 2014, subparagraph (A) shall be applied by substituting for "8 percent" the percentage the Secretary of Health and Human Services determines reflects the excess of the rate of premium growth between the preceding calendar year and 2013 over the rate of income growth for such period.
(2) Taxpayers with income below filing threshold
Any applicable individual for any month during a calendar year if the individual's household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act is less than the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.
(3) Members of Indian tribes
Any applicable individual for any month during which the individual is a member of an Indian tribe (as defined in section 45A(c)(6)).
(4) Months during short coverage gaps
(A) In general
Any month the last day of which occurred during a period in which the applicable individual was not covered by minimum essential coverage for a continuous period of less than 3 months.
(B) Special rules
For purposes of applying this paragraph—
(i) the length of a continuous period shall be determined without regard to the calendar years in which months in such period occur,
(ii) if a continuous period is greater than the period allowed under subparagraph (A), no exception shall be provided under this paragraph for any month in the period, and
(iii) if there is more than 1 continuous period described in subparagraph (A) covering months in a calendar year, the exception provided by this paragraph shall only apply to months in the first of such periods.
The Secretary shall prescribe rules for the collection of the penalty imposed by this section in cases where continuous periods include months in more than 1 taxable year.
(5) Hardships
Any applicable individual who for any month is determined by the Secretary of Health and Human Services under section 1311(d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.
(f) Minimum essential coverage
For purposes of this section—
(1) In general
The term "minimum essential coverage" means any of the following:
(A) Government sponsored programs
Coverage under—
(i) the Medicare program under part A of title XVIII of the Social Security Act,
(ii) the Medicaid program under title XIX of the Social Security Act,
(iii) the CHIP program under title XXI of the Social Security Act or under a qualified CHIP look-alike program (as defined in section 2107(g) of the Social Security Act),
(iv) medical coverage under
(v) a health care program under
(vi) a health plan under
(vii) the Nonappropriated Fund Health Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 (
(B) Employer-sponsored plan
Coverage under an eligible employer-sponsored plan.
(C) Plans in the individual market
Coverage under a health plan offered in the individual market within a State.
(D) Grandfathered health plan
Coverage under a grandfathered health plan.
(E) Other coverage
Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with the Secretary, recognizes for purposes of this subsection.
(2) Eligible employer-sponsored plan
The term "eligible employer-sponsored plan" means, with respect to any employee, a group health plan or group health insurance coverage offered by an employer to the employee which is—
(A) a governmental plan (within the meaning of section 2791(d)(8) of the Public Health Service Act), or
(B) any other plan or coverage offered in the small or large group market within a State.
Such term shall include a grandfathered health plan described in paragraph (1)(D) offered in a group market.
(3) Excepted benefits not treated as minimum essential coverage
The term "minimum essential coverage" shall not include health insurance coverage which consists of coverage of excepted benefits—
(A) described in paragraph (1) of subsection (c) of section 2791 of the Public Health Service Act; or
(B) described in paragraph (2), (3), or (4) of such subsection if the benefits are provided under a separate policy, certificate, or contract of insurance.
(4) Individuals residing outside United States or residents of territories
Any applicable individual shall be treated as having minimum essential coverage for any month—
(A) if such month occurs during any period described in subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or
(B) if such individual is a bona fide resident of any possession of the United States (as determined under section 937(a)) for such month.
(5) Insurance-related terms
Any term used in this section which is also used in title I of the Patient Protection and Affordable Care Act shall have the same meaning as when used in such title.
(g) Administration and procedure
(1) In general
The penalty provided by this section shall be paid upon notice and demand by the Secretary, and except as provided in paragraph (2), shall be assessed and collected in the same manner as an assessable penalty under subchapter B of
(2) Special rules
Notwithstanding any other provision of law—
(A) Waiver of criminal penalties
In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
(B) Limitations on liens and levies
The Secretary shall not—
(i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or
(ii) levy on any such property with respect to such failure.
(Added and amended
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The Patient Protection and Affordable Care Act and such Act, referred to in subsecs. (d)(2)(A), (e)(1)(A), (2), and (f)(5), are
The Social Security Act, referred to in subsec. (f)(1)(A)(i) to (iii), is act Aug. 14, 1935, ch. 531,
Section 2791 of the Public Health Service Act, referred to in subsec. (f)(2)(A), (3), is classified to
Amendments
2018—Subsec. (d)(2)(A).
"(i) a member of a recognized religious sect or division thereof which is described in section 1402(g)(1), and
"(ii) an adherent of established tenets or teachings of such sect or division as described in such section."
Subsec. (f)(1)(A)(iii).
2017—Subsec. (c)(2)(B)(iii).
Subsec. (c)(3)(A).
Subsec. (c)(3)(D).
"(i) $695, multiplied by
"(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting 'calendar year 2015' for 'calendar year 2016' in subparagraph (A)(ii) thereof.
If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50."
Subsec. (c)(3)(D)(ii).
2010—Subsec. (b)(1).
Subsec. (c)(1), (2).
Subsec. (c)(2)(B).
Subsec. (c)(2)(B)(i).
Subsec. (c)(2)(B)(ii).
Subsec. (c)(2)(B)(iii).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B).
Subsec. (c)(3)(D).
Subsec. (c)(4)(B)(i), (ii).
Subsec. (c)(4)(C).
"(i) decreased by the amount of any deduction allowable under paragraph (1), (3), (4), or (10) of section 62(a),
"(ii) increased by the amount of interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, and
"(iii) determined without regard to sections 911, 931, and 933."
Subsec. (c)(4)(D).
"(i)
"(ii)
Subsec. (d)(2)(A).
Subsec. (e)(1)(C).
Subsec. (e)(2).
Subsec. (f)(1)(A)(iv).
Subsec. (f)(1)(A)(v).
Subsec. (f)(1)(A)(vii).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(GG) of
Effective Date of 2010 Amendment
Effective Date
Construction of 2018 Amendment
1 So in original. Probably should be followed by "the".
2 So in original. The semicolon probably should be a comma.
CHAPTER 49 —COSMETIC SERVICES
Editorial Notes
Prior Provisions
A prior
§5000B. Imposition of tax on indoor tanning services
(a) In general
There is hereby imposed on any indoor tanning service a tax equal to 10 percent of the amount paid for such service (determined without regard to this section), whether paid by insurance or otherwise.
(b) Indoor tanning service
For purposes of this section—
(1) In general
The term "indoor tanning service" means a service employing any electronic product designed to incorporate 1 or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.
(2) Exclusion of phototherapy services
Such term does not include any phototherapy service performed by a licensed medical professional.
(c) Payment of tax
(1) In general
The tax imposed by this section shall be paid by the individual on whom the service is performed.
(2) Collection
Every person receiving a payment for services on which a tax is imposed under subsection (a) shall collect the amount of the tax from the individual on whom the service is performed and remit such tax quarterly to the Secretary at such time and in such manner as provided by the Secretary.
(3) Secondary liability
Where any tax imposed by subsection (a) is not paid at the time payments for indoor tanning services are made, then to the extent that such tax is not collected, such tax shall be paid by the person who performs the service.
(Added
Editorial Notes
Prior Provisions
A prior section 5000B, added
Statutory Notes and Related Subsidiaries
Effective Date
CHAPTER 50 —FOREIGN PROCUREMENT
§5000C. Imposition of tax on certain foreign procurement
(a) Imposition of tax
There is hereby imposed on any foreign person that receives a specified Federal procurement payment a tax equal to 2 percent of the amount of such specified Federal procurement payment.
(b) Specified Federal procurement payment
For purposes of this section, the term "specified Federal procurement payment" means any payment made pursuant to a contract with the Government of the United States for—
(1) the provision of goods, if such goods are manufactured or produced in any country which is not a party to an international procurement agreement with the United States, or
(2) the provision of services, if such services are provided in any country which is not a party to an international procurement agreement with the United States.
(c) Foreign person
For purposes of this section, the term "foreign person" means any person other than a United States person.
(d) Administrative provisions
(1) Withholding
The amount deducted and withheld under
(2) Other administrative provisions
For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Prohibition on Reimbursement of Fees
"(1)
"(2)
"(3)
Application
CHAPTER 50A —DESIGNATED DRUGS
§5000D. Designated drugs during noncompliance periods
(a) In general
There is hereby imposed on the sale by the manufacturer, producer, or importer of any designated drug during a day described in subsection (b) a tax in an amount such that the applicable percentage is equal to the ratio of—
(1) such tax, divided by
(2) the sum of such tax and the price for which so sold.
(b) Noncompliance periods
A day is described in this subsection with respect to a designated drug if it is a day during one of the following periods:
(1) The period beginning on the March 1st (or, in the case of initial price applicability year 2026, the October 2nd) immediately following the date on which such drug is included on the list published under section 1192(a) of the Social Security Act and ending on the earlier of—
(A) the first date on which the manufacturer of such designated drug has in place an agreement described in section 1193(a) of such Act with respect to such drug, or
(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.
(2) The period beginning on the November 2nd immediately following the March 1st described in paragraph (1) (or, in the case of initial price applicability year 2026, the August 2nd immediately following the October 2nd described in such paragraph) and ending on the earlier of—
(A) the first date on which the manufacturer of such designated drug and the Secretary of Health and Human Services have agreed to a maximum fair price under an agreement described in section 1193(a) of the Social Security Act, or
(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.
(3) In the case of any designated drug which is a selected drug (as defined in section 1192(c) of the Social Security Act) that the Secretary of Health and Human Services has selected for renegotiation under section 1194(f) of such Act, the period beginning on the November 2nd of the year that begins 2 years prior to the first initial price applicability year of the price applicability period for which the maximum fair price established pursuant to such renegotiation applies and ending on the earlier of—
(A) the first date on which the manufacturer of such designated drug has agreed to a renegotiated maximum fair price under such agreement, or
(B) the date that the Secretary of Health and Human Services has made a determination described in section 1192(c)(1) of such Act with respect to such designated drug.
(4) With respect to information that is required to be submitted to the Secretary of Health and Human Services under an agreement described in section 1193(a) of the Social Security Act, the period beginning on the date on which such Secretary certifies that such information is overdue and ending on the date that such information is so submitted.
(c) Suspension of tax
(1) In general
A day shall not be taken into account as a day during a period described in subsection (b) if such day is also a day during the period—
(A) beginning on the first date on which—
(i) the notice of terminations of all applicable agreements of the manufacturer have been received by the Secretary of Health and Human Services, and
(ii) none of the drugs of the manufacturer of the designated drug are covered by an agreement under section 1860D–14A or 1860D–14C of the Social Security Act, and
(B) ending on the last day of February following the earlier of—
(i) the first day after the date described in subparagraph (A) on which the manufacturer enters into any subsequent applicable agreement, or
(ii) the first date any drug of the manufacturer of the designated drug is covered by an agreement under section 1860D–14A or 1860D–14C of the Social Security Act.
(2) Applicable agreement
For purposes of this subsection, the term "applicable agreement" means the following:
(A) An agreement under—
(i) the Medicare coverage gap discount program under section 1860D–14A of the Social Security Act, or
(ii) the manufacturer discount program under section 1860D–14C of such Act.
(B) A rebate agreement described in section 1927(b) of such Act.
(d) Applicable percentage
For purposes of this section, the term "applicable percentage" means—
(1) in the case of sales of a designated drug during the first 90 days described in subsection (b) with respect to such drug, 65 percent,
(2) in the case of sales of such drug during the 91st day through the 180th day described in subsection (b) with respect to such drug, 75 percent,
(3) in the case of sales of such drug during the 181st day through the 270th day described in subsection (b) with respect to such drug, 85 percent, and
(4) in the case of sales of such drug during any subsequent day, 95 percent.
(e) Definitions
For purposes of this section—
(1) Designated drug
The term "designated drug" means any negotiation-eligible drug (as defined in section 1192(d) of the Social Security Act) included on the list published under section 1192(a) of such Act which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.
(2) United States
The term "United States" has the meaning given such term by section 4612(a)(4).
(3) Other terms
The terms "initial price applicability year", "price applicability period", and "maximum fair price" have the meaning given such terms in section 1191 of the Social Security Act.
(f) Special rules
(1) Coordination with rules for possessions of the United States
Rules similar to the rules of paragraphs (2) and (4) of section 4132(c) shall apply for purposes of this section.
(2) Anti-abuse rule
In the case of a sale which was timed for the purpose of avoiding the tax imposed by this section, the Secretary may treat such sale as occurring during a day described in subsection (b).
(g) Exports
Rules similar to the rules of section 4662(e) (other than section 4662(e)(2)(A)(ii)(II)) shall apply for purposes of this chapter.
(h) Regulations
The Secretary shall prescribe such regulations and other guidance as may be necessary to carry out this section.
(Added
Editorial Notes
References in Text
The Social Security Act, referred to in text, is act Aug. 14, 1935, ch. 531,