US (United States) Code. Title 26. Subtitle D: Miscellaneous Excise Taxes. Chapter 43: Qualified pension, etc

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-CITE-

26 USC CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-MISC1-

Sec.

4971. Taxes on failure to meet minimum funding standards.

4972. Tax on nondeductible contributions to qualified

employer plans.

4973. Tax on excess contributions to certain tax-favored

accounts and annuities.

4974. Excise tax on certain accumulations in qualified

retirement plans.

4975. Tax on prohibited transactions.

4976. Taxes with respect to funded welfare benefit plans.

4977. Tax on certain fringe benefits provided by an

employer.

4978. Tax on certain dispositions by employee stock

ownership plans and certain cooperatives.

[4978A, 4978B. Repealed.]

4979. Tax on certain excess contributions.

4979A. Tax on certain prohibited allocations of qualified

securities.

4980. Tax on reversion of qualified plan assets to employer.

4980A. Tax on excess distributions from qualified retirement

plans.(!1)

4980B. Failure to satisfy continuation coverage requirements

of group health plans.

4980C. Requirements for issuers of qualified long-term care

insurance contracts.

4980D. Failure to meet certain group health plan

requirements.

4980E. Failure of employer to make comparable Archer MSA

contributions.

4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.

AMENDMENTS

2002 - Pub. L. 107-147, title IV, Sec. 417(17)(B), Mar. 9, 2002,

116 Stat. 56, substituted "Archer MSA contributions" for "medical

savings account contributions" in item 4980E.

2001 - Pub. L. 107-16, title VI, Sec. 659(a)(2), June 7, 2001,

115 Stat. 139, added item 4980F.

1998 - Pub. L. 105-206, title VI, Sec. 6023(18)(B), July 22,

1998, 112 Stat. 825, substituted "certain tax-favored accounts and

annuities" for "individual retirement accounts, certain section

403(b) contracts, and certain individual retirement annuities" in

item 4973.

1996 - Pub. L. 104-191, title III, Secs. 301(c)(4)(B), 326(b),

title IV, Sec. 402(b), Aug. 21, 1996, 110 Stat. 2050, 2066, 2087,

added items 4980C, 4980D, and 4980E.

Pub. L. 104-188, title I, Sec. 1602(b)(5)(B), Aug. 20, 1996, 110

Stat. 1834, struck out item 4978B "Tax on disposition of employer

securities to which section 133 applied".

1989 - Pub. L. 101-239, title VII, Secs. 7301(d)(2),

7304(a)(2)(C)(iii), Dec. 19, 1989, 103 Stat. 2348, 2353, struck out

item 4978A "Tax on certain dispositions of employer securities to

which section 2057 applied" and added item 4978B.

1988 - Pub. L. 100-647, title I, Sec. 1011A(g)(1)(B), title III,

Sec. 3011(c), Nov. 10, 1988, 102 Stat. 3479, 3625, redesignated

item 4981A as 4980A and added item 4980B.

1987 - Pub. L. 100-203, title X, Sec. 10413(b)(2), Dec. 22, 1987,

101 Stat. 1330-438, added item 4978A.

1986 - Pub. L. 99-514, title XI, Secs. 1117(b)(2), 1121(a)(2),

1131(c)(2), 1132(b), 1133(b), title XVIII, Secs. 1854(a)(9)(C),

1899A(75), Oct. 22, 1986, 100 Stat. 2462, 2465, 2478, 2480, 2483,

2877, 2963, added item 4972, inserted "section" in item 4973,

substituted "Excise tax on certain accumulations in qualified

retirement plans" for "Tax on certain accumulations in individual

retirement accounts" in item 4974, struck out "and allocations"

after "certain dispositions" in item 4978, and added items 4979,

4979A, 4980, and 4981A.

1984 - Pub. L. 98-369, div. A, title IV, Sec. 491(d)(56), title

V, Secs. 511(c)(2), 531(e)(2), 545(b), July 18, 1984, 98 Stat. 852,

862, 886, 896, substituted "and certain individual retirement

annuities" for "certain individual retirement annuities, and

certain retirement bonds" in item 4973 and added items 4976 to

4978.

1982 - Pub. L. 97-248, title II, Sec. 237(c)(2), Sept. 3, 1982,

96 Stat. 511, struck out item 4972 "Tax on excess contributions for

self-employed individuals".

1974 - Pub. L. 93-406, title II, Secs. 1013(b), 2001(f)(2),

2002(h)(3), Sept. 2, 1974, 88 Stat. 920, 957, 970, added chapter

heading and analysis of sections 4971 to 4975.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in sections 275, 6161, 6201, 6211,

6212, 6213, 6214, 6344, 6405, 6501, 6512, 6862, 6871, 7422 of this

title.

-FOOTNOTE-

(!1) Section repealed by Pub. L. 105-34 without corresponding

amendment of chapter analysis.

-End-

-CITE-

26 USC Sec. 4971 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

Sec. 4971. Taxes on failure to meet minimum funding standards

-STATUTE-

(a) Initial tax

For each taxable year of an employer who maintains a plan to

which section 412 applies, there is hereby imposed a tax of 10

percent (5 percent in the case of a multiemployer plan) on the

amount of the accumulated funding deficiency under the plan,

determined as of the end of the plan year ending with or within

such taxable year.

(b) Additional tax

In any case in which an initial tax is imposed by subsection (a)

on an accumulated funding deficiency and such accumulated funding

deficiency is not corrected within the taxable period, there is

hereby imposed a tax equal to 100 percent of such accumulated

funding deficiency to the extent not 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 the last two sentences of section 412(a).

(2) Correct

The term "correct" means, with respect to an accumulated

funding deficiency, the contribution, to or under the plan, of

the amount necessary to reduce such 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, the period beginning with the end of the plan

year in which there is an accumulated funding deficiency 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.

(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,

or

(2) to comment on the imposition of such tax.

In the case of a multiemployer plan which is in reorganization

under section 418, the same notice and opportunity shall be

provided to the Pension Benefit Guaranty Corporation.

(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(b)(3)(A).

(2) Joint and several liability where employer member of

controlled group

(A) In general

In the case of a plan other than a multiemployer plan, if the

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), or (f).

(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 412(m)(5) 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 412(m) 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 412(m)(5).

(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) 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.

-SOURCE-

(Added Pub. L. 93-406, title II, Sec. 1013(b), Sept. 2, 1974, 88

Stat. 920; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),

Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96-364, title II, Sec. 204,

Sept. 26, 1980, 94 Stat. 1287; Pub. L. 96-596, Sec. 2(a)(1)(J),

(2)(H), Dec. 24, 1980, 94 Stat. 3469, 3471; Pub. L. 100-203, title

IX, Secs. 9304(c)(1), 9305(a), Dec. 22, 1987, 101 Stat. 1330-348,

1330-351; Pub. L. 103-465, title VII, Sec. 751(a)(9)(B), Dec. 8,

1994, 108 Stat. 5020; Pub. L. 104-188, title I, Sec. 1464(a), Aug.

20, 1996, 110 Stat. 1824.)

-REFTEXT-

REFERENCES IN TEXT

Section 3002(b) of title III of the Employee Retirement Income

Security Act of 1974, referred to in subsec. (g), is classified to

section 1202(b) of Title 29, Labor.

-MISC1-

AMENDMENTS

1996 - Subsec. (f)(4). Pub. L. 104-188 added par. (4).

1994 - Subsec. (e)(1), (2)(A). Pub. L. 103-465, Sec.

751(a)(9)(B)(i), substituted "(a), (b), or (f)" for "(a) or (b)".

Subsecs. (f), (g). Pub. L. 103-465, Sec. 751(a)(9)(B)(ii), added

subsec. (f) and redesignated former subsec. (f) as (g).

1987 - Subsec. (a). Pub. L. 100-203, Sec. 9305(a)(2)(A), struck

out at end "The tax imposed by this subsection shall be paid by the

employer responsible for contributing to or under the plan the

amount described in section 412(b)(3)(A)."

Pub. L. 100-203, Sec. 9304(c)(1), substituted "10 percent (5

percent in the case of a multiemployer plan)" for "5 percent".

Subsec. (b). Pub. L. 100-203, Sec. 9305(a)(2)(B), struck out at

end "The tax imposed by this subsection shall be paid by the

employer described in subsection (a)."

Subsecs. (e), (f). Pub. L. 100-203, Sec. 9305(a)(1), added

subsec. (e) and redesignated former subsec. (e) as (f).

1980 - Subsec. (b). Pub. L. 96-596, Sec. 2(a)(1)(J), substituted

"taxable period" for "correction period".

Subsec. (c)(1). Pub. L. 96-364, Sec. 204(1), substituted "last

two sentences" for "last sentence".

Subsec. (c)(3). Pub. L. 96-596, Sec. 2(a)(2)(H), substituted

provision defining taxable period as the period beginning with the

end of the plan year in which there is an accumulated funding

deficiency and ending on the earlier of the date of mailing of a

notice of deficiency with respect to the tax imposed by subsec. (a)

of this section or the date on which the tax imposed by subsec. (a)

of this section is assessed for provision defining correction

period as the period beginning with the end of a plan year in which

there is an accumulated funding deficiency and ending 90 days after

the date of mailing of a notice of deficiency under section 6212 of

this title with respect to the tax imposed by subsec. (b) of this

section, extended by any period in which a deficiency cannot be

assessed under section 6213(a) of this title and by any other

period which the Secretary determines reasonable and necessary to

permit a reduction of the accumulated funding deficiency to zero.

Subsec. (d). Pub. L. 96-364, Sec. 204(2), inserted provisions

relating to a multiemployer plan in reorganization.

1976 - Subsecs. (c), (d). Pub. L. 94-455 struck out "or his

delegate" after "Secretary" wherever appearing.

EFFECTIVE DATE OF 1996 AMENDMENT

Section 1464(b) of Pub. L. 104-188 provided that: "The amendment

made by this section [amending this section] shall take effect as

if included in the amendment made by clause (ii) of section

751(a)(9)(B) of the Retirement Protection Act of 1994 [Pub. L.

103-465] (108 Stat. 5020)."

EFFECTIVE DATE OF 1994 AMENDMENT

Amendment by Pub. L. 103-465 applicable to plan years beginning

after Dec. 31, 1994, see section 751(b)(1) of Pub. L. 103-465, set

out as a note under section 401 of this title.

EFFECTIVE DATE OF 1987 AMENDMENT

Section 9304(c)(2) of Pub. L. 100-203 provided that: "The

amendments made by this subsection [amending this section] shall

apply to plan years beginning after 1988."

Amendment by section 9305(a) of Pub. L. 100-203 applicable with

respect to plan years beginning after December 31, 1987, see

section 9305(d) of Pub. L. 100-203, set out as a note under section

412 of this title.

EFFECTIVE DATE OF 1980 AMENDMENTS

For effective date of amendment by Pub. L. 96-596 with respect to

any first tier tax and to any second tier tax, see section 2(d) of

Pub. L. 96-596, set out as an Effective Date note under section

4961 of this title.

Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section

210(a) of Pub. L. 96-364, set out as an Effective Date note under

section 418 of this title.

EFFECTIVE DATE

Section applicable, except as otherwise provided in section

1017(c) through (i) of Pub. L. 93-406, for plan years beginning

after Sept. 2, 1974, and, in the case of plans in existence on Jan.

1, 1974, for plan years beginning after Dec. 31, 1975, see section

1017 of Pub. L. 93-406, set out as an Effective Date; Transitional

Rules note under section 410 of this title.

PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998

For provisions directing that if any amendments made by subtitle

D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an

amendment to any plan or annuity contract, such amendment shall not

be required to be made before the first day of the first plan year

beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.

104-188, set out as a note under section 401 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 413, 4963, 6503 of this

title.

-End-

-CITE-

26 USC Sec. 4972 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

Sec. 4972. Tax on nondeductible contributions to qualified employer

plans

-STATUTE-

(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

greater of -

(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 sum of -

(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

(B) so much of the contributions to a simple retirement

account (within the meaning of section 408(p)) or a simple plan

(within the meaning of section 401(k)(11)) 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)).

(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

to the extent that such contributions exceed the full-funding

limitation (as defined in section 412(c)(7), determined without

regard to subparagraph (A)(i)(I) thereof). 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).

-SOURCE-

(Added Pub. L. 99-514, title XI, Sec. 1131(c)(1), Oct. 22, 1986,

100 Stat. 2477; amended Pub. L. 100-647, title I, Sec. 1011A(e)(1),

(2), title II, Sec. 2005(a)(1), Nov. 10, 1988, 102 Stat. 3477,

3610; Pub. L. 103-465, title VII, Sec. 755(a), Dec. 8, 1994, 108

Stat. 5023; Pub. L. 104-188, title I, Sec. 1421(b)(9)(D), Aug. 20,

1996, 110 Stat. 1798; Pub. L. 105-34, title XV, Sec. 1507(a), Aug.

5, 1997, 111 Stat. 1067; Pub. L. 107-16, title VI, Secs.

616(b)(2)(B), 637(a), (b), 652(b), 653(a), June 7, 2001, 115 Stat.

103, 118, 130.)

-STATAMEND-

AMENDMENT OF SECTION

For termination of amendment by section 901 of Pub. L. 107-16,

see Effective and Termination Dates of 2001 Amendment note below.

-MISC1-

PRIOR PROVISIONS

A prior section, added Pub. L. 93-406, title II, Sec. 2001(f)(1),

Sept. 2, 1974, 88 Stat. 955; amended Pub. L. 94-455, title XIX,

Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97-34,

title III, Sec. 312(e)(3), Aug. 13, 1981, 95 Stat. 285; Pub. L.

97-448, title I, Sec. 103(c)(10)(B), Jan. 12, 1983, 96 Stat. 2377;

Pub. L. 98-369, div. A, title IV, Sec. 491(d)(40), July 18, 1984,

98 Stat. 851, related to tax on excess contributions for

self-employed individuals, prior to repeal applicable to years

beginning after Dec. 31, 1983, by Pub. L. 97-248, title II, Sec.

237(c)(1), Sept. 3, 1982, 96 Stat. 511.

AMENDMENTS

2001 - Subsec. (c)(6). Pub. L. 107-16, Secs. 652(b)(4), 901,

temporarily substituted "Subparagraph (B)" for "Subparagraph (C)"

in concluding provisions. See Effective and Termination Dates of

2001 Amendment note below.

Pub. L. 107-16, Secs. 652(b)(3), 901, which directed the

temporary substitution of "subparagraph (A)" for "subparagraph (B)"

in concluding provisions, was executed by making the substitution

in two places, to reflect the probable intent of Congress. See

Effective and Termination Dates of 2001 Amendment note below.

Pub. L. 107-16, Secs. 652(b)(2), 901, in concluding provisions,

temporarily struck out first sentence which read as follows: "If 1

or more defined benefit plans were taken into account in

determining the amount allowable as a deduction under section 404

for contributions to any defined contribution plan, subparagraph

(B) shall apply only if such defined benefit plans are described in

section 404(a)(1)(D)." See Effective and Termination Dates of 2001

Amendment note below.

Pub. L. 107-16, Secs. 637(b), 901, in concluding provisions,

temporarily inserted at end "Subparagraph (C) 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))." See Effective

and Termination Dates of 2001 Amendment note below.

Subsec. (c)(6)(A). Pub. L. 107-16, Secs. 652(b)(1), 901,

temporarily redesignated subpar. (B) as (A) and struck out former

subpar. (A) which read as follows: "contributions that would be

deductible under section 404(a)(1)(D) if the plan had more than 100

participants if -

"(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,".

See Effective and Termination Dates of 2001 Amendment note below.

Pub. L. 107-16, Secs. 637(a), 901, temporarily struck out "and"

at end. See Effective and Termination Dates of 2001 Amendment note

below.

Subsec. (c)(6)(B). Pub. L. 107-16, Secs. 652(b)(1), 901,

temporarily redesignated subpar. (C) as (B). Former subpar. (B)

redesignated (A). See Effective and Termination Dates of 2001

Amendment note below.

Pub. L. 107-16, Secs. 637(a), 901, temporarily substituted ", or"

for period at end. See Effective and Termination Dates of 2001

Amendment note below.

Subsec. (c)(6)(B)(i). Pub. L. 107-16, Secs. 616(b)(2)(B), 901,

temporarily substituted "(within the meaning of section 404(a) and

as adjusted under section 404(a)(12))" for "(within the meaning of

section 404(a))". See Effective and Termination Dates of 2001

Amendment note below.

Subsec. (c)(6)(C). Pub. L. 107-16, Secs. 652(b)(1), 901,

temporarily redesignated subpar. (C) as (B). See Effective and

Termination Dates of 2001 Amendment note below.

Pub. L. 107-16, Secs. 637(a), 901, temporarily added subpar. (C).

See Effective and Termination Dates of 2001 Amendment note below.

Subsec. (c)(7). Pub. L. 107-16, Secs. 653(a), 901, temporarily

added par. (7). See Effective and Termination Dates of 2001

Amendment note below.

1997 - Subsec. (c)(6)(B). Pub. L. 105-34 amended subpar. (B)

generally. Prior to amendment, subpar. (B) read as follows:

"contributions to 1 or more defined contribution plans which are

not deductible when contributed solely because of section

404(a)(7), but only to the extent such contributions do not exceed

6 percent of compensation (within the meaning of section 404(a))

paid or accrued (during the taxable year for which the

contributions were made) to beneficiaries under the plans."

1996 - Subsec. (d)(1)(A)(iv). Pub. L. 104-188 added cl. (iv).

1994 - Subsec. (c)(6). Pub. L. 103-465 added par. (6).

1988 - Subsec. (c). Pub. L. 100-647, Sec. 1011A(e)(1), amended

subsec. (c) generally, revising and restating as pars. (1) to (4)

provisions of former pars. (1) and (2).

Subsec. (c)(4), (5). Pub. L. 100-647, Sec. 2005(a)(1), added par.

(4) and redesignated former par. (4) as (5).

Subsec. (d)(1). Pub. L. 100-647, Sec. 1011A(e)(2), amended par.

(1) generally. Prior to amendment, par. (1) read as follows: "The

term 'qualified employer plan' means -

"(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))."

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT

Amendment by section 616(b)(2)(B) of Pub. L. 107-16 applicable to

years beginning after Dec. 31, 2001, see section 616(c) of Pub. L.

107-16, set out as a note under section 404 of this title.

Pub. L. 107-16, title VI, Sec. 637(d), June 7, 2001, 115 Stat.

118, provided that: "The amendments made by this section [amending

this section] shall apply to taxable years beginning after December

31, 2001."

Amendment by section 652(b) of Pub. L. 107-16 applicable to plan

years beginning after Dec. 31, 2001, see section 652(c) of Pub. L.

107-16, set out as a note under section 404 of this title.

Pub. L. 107-16, title VI, Sec. 653(b), June 7, 2001, 115 Stat.

130, provided that: "The amendment made by this section [amending

this section] shall apply to years beginning after December 31,

2001."

Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or

limitation years beginning after Dec. 31, 2010, and the Internal

Revenue Code of 1986 to be applied and administered to such years

as if such amendment had never been enacted, see section 901 of

Pub. L. 107-16, set out as a note under section 1 of this title.

EFFECTIVE DATE OF 1997 AMENDMENT

Section 1507(b) of Pub. L. 105-34 provided that: "The amendments

made by this section [amending this section] shall apply to taxable

years beginning after December 31, 1997."

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by Pub. L. 104-188 applicable to taxable years

beginning after Dec. 31, 1996, see section 1421(e) of Pub. L.

104-188, set out as a note under section 72 of this title.

EFFECTIVE DATE OF 1994 AMENDMENT

Section 755(b) of Pub. L. 103-465 provided that:

"(1) Section 4972(c)(6)(a). - Section 4972(c)(6)(A) of the

Internal Revenue Code of 1986 (as added by this section) shall

apply to taxable years ending on or after the date of enactment of

this Act [Dec. 8, 1994].

"(2) Section 4972(c)(6)(b). - Section 4972(c)(6)(B) of such Code

(as added by this section) shall apply to taxable years ending on

or after December 31, 1992."

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by section 1011A(e)(1), (2) of Pub. L. 100-647

effective, except as otherwise provided, as if included in the

provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which

such amendment relates, see section 1019(a) of Pub. L. 100-647, set

out as a note under section 1 of this title.

Amendment by section 2005(a)(1) of Pub. L. 100-647 effective as

if included in the amendment made by section 1131(c) of Pub. L.

99-514, see section 2005(e) of Pub. L. 100-647, as amended, set out

as a note under section 404 of this title.

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 Pub. L.

99-514, as amended, set out as an Effective Date of 1986 Amendment

note under section 404 of this title.

CONSTRUCTION OF 2001 AMENDMENT

Pub. L. 107-16, title VI, Sec. 637(c), June 7, 2001, 115 Stat.

118, provided that: "Nothing in the amendments made by this section

[amending this section] shall be construed to infer the proper

treatment of nondeductible contributions under the laws in effect

before such amendments."

INCREASE IN AMOUNT FOR PLAN TERMINATION INSURANCE UNDER EMPLOYEE

RETIREMENT INSURANCE SECURITY ACT OF 1974

Section 1011A(e)(5) of Pub. L. 100-647 provided that: "In the

case of any taxable year beginning in 1987, the amount under

section 4972(c)(1)(A)(ii) of the 1986 Code for a plan to which

title IV of the Employee Retirement Income Security Act of 1974 [29

U.S.C. 1301 et seq.] applies shall be increased by the amount (if

any) by which, as of the close of the plan year with or within

which such taxable year begins -

"(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 [Secs. 1401-1465] of title I of Pub. L. 104-188 require an

amendment to any plan or annuity contract, such amendment shall not

be required to be made before the first day of the first plan year

beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.

104-188, set out as a note under section 401 of this title.

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 [Secs. 1101-1147 and 1171-1177] or

title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an

amendment to any plan, such plan amendment shall not be required to

be made before the first plan year beginning on or after Jan. 1,

1989, see section 1140 of Pub. L. 99-514, as amended, set out as a

note under section 401 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 45E of this title.

-End-

-CITE-

26 USC Sec. 4973 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

Sec. 4973. Tax on excess contributions to certain tax-favored

accounts and annuities

-STATUTE-

(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), or

(4) a Coverdell education savings account (as defined in

section 530),

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).

(c) Section 403(b) contracts

For purposes of this section, in the case of a custodial account

referred to in subsection (a)(2), 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.

-SOURCE-

(Added Pub. L. 93-406, title II, Sec. 2002(d), Sept. 2, 1974, 88

Stat. 966; amended Pub. L. 94-455, title XV, Sec. 1501(b)(8), title

XIX, Sec. 1904(a)(22), Oct. 4, 1976, 90 Stat. 1736, 1814; Pub. L.

95-600, title I, Secs. 156(c)(3), (5), 157(b)(3), (j)(1), title

VII, Sec. 701(aa)(1), Nov. 6, 1978, 92 Stat. 2803, 2804, 2809,

2921; Pub. L. 96-222, title I, Sec. 101(a)(13)(C), (14)(B), Apr. 1,

1980, 94 Stat. 204; Pub. L. 97-34, title III, Secs. 311(h)(7), (9),

(10), 313(b)(2), Aug. 13, 1981, 95 Stat. 282, 286; Pub. L. 98-369,

div. A, title IV, Sec. 491(d)(41)-(44), (55), July 18, 1984, 98

Stat. 851, 852; Pub. L. 99-514, title XI, Sec. 1102(b)(1), title

XVIII, Sec. 1848(f), Oct. 22, 1986, 100 Stat. 2415, 2858; Pub. L.

100-647, title I, Sec. 1011(b)(3), Nov. 10, 1988, 102 Stat. 3456;

Pub. L. 102-318, title V, Sec. 521(b)(41), July 3, 1992, 106 Stat.

313; Pub. L. 104-188, title I, Sec. 1704(t)(70), (72), Aug. 20,

1996, 110 Stat. 1891; Pub. L. 104-191, title III, Sec. 301(e), Aug.

21, 1996, 110 Stat. 2051; Pub. L. 105-33, title IV, Sec.

4006(b)(1), Aug. 5, 1997, 111 Stat. 333; Pub. L. 105-34, title II,

Sec. 213(d), title III, Sec. 302(b), Aug. 5, 1997, 111 Stat. 817,

828; Pub. L. 105-206, title VI, Secs. 6004(d)(10), 6005(b)(8),

6023(18)(A), July 22, 1998, 112 Stat. 795, 799, 825; Pub. L.

106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(6), (b)(2)(C), (6),

(10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628, 2763A-629; Pub. L.

107-16, title IV, Secs. 401(a)(2), (g)(2)(D), 402(a)(4)(A), title

VI, Sec. 641(e)(11), June 7, 2001, 115 Stat. 57, 60, 121; Pub. L.

107-22, Sec. 1(b)(1)(C), (2)(B), (4), July 26, 2001, 115 Stat.

197.)

-STATAMEND-

AMENDMENT OF SECTION

For termination of amendment by section 901 of Pub. L. 107-16,

see Effective and Termination Dates of 2001 Amendment note below.

-MISC1-

AMENDMENTS

2001 - Subsec. (a)(4). Pub. L. 107-22, Sec. 1(b)(1)(C),

substituted "a Coverdell education savings" for "an education

individual retirement".

Subsec. (b)(1)(A). Pub. L. 107-16, Secs. 641(e)(11), 901,

temporarily substituted "408(d)(3), or 457(e)(16)" for "or

408(d)(3)". See Effective and Termination Dates of 2001 Amendment

note below.

Subsec. (e). Pub. L. 107-22, Sec. 1(b)(4), substituted "Coverdell

education savings" for "education individual retirement" in

heading.

Pub. L. 107-16, Secs. 402(a)(4)(A), 901, which directed the

temporary substitution of "qualified tuition" for "qualified State

tuition" wherever appearing in subsec. (e), could not be executed

because the term "qualified State tuition" did not appear

subsequent to amendment by section 401(g)(2)(D) of Pub. L. 107-16,

which struck out par. (1)(B). See below, and see Effective and

Termination Dates of 2001 Amendment note below.

Subsec. (e)(1). Pub. L. 107-22, Sec. 1(b)(2)(B), substituted

"Coverdell education savings" for "education individual retirement"

in introductory provisions.

Subsec. (e)(1)(A). Pub. L. 107-16, Secs. 401(a)(2), (g)(2)(D),

901, temporarily substituted "$2,000" for "$500" and inserted "and"

at end. See Effective and Termination Dates of 2001 Amendment note

below.

Subsec. (e)(1)(B), (C). Pub. L. 107-16, Secs. 401(g)(2)(D), 901,

temporarily redesignated subpar. (C) as (B) and struck out former

subpar. (B) which read as follows: "if any amount is contributed

(other than a contribution described in section 530(b)(2)(B))

during such year to a qualified State tuition program for the

benefit of such beneficiary, any amount contributed to such

accounts for such taxable year; and". See Effective and Termination

Dates of 2001 Amendment note below.

Subsec. (e)(2)(A). Pub. L. 107-22, Sec. 1(b)(2)(B), substituted

"Coverdell education savings" for "education individual

retirement".

2000 - Subsec. (a)(2). Pub. L. 106-554, Sec. 1(a)(7) [title II,

Sec. 202(b)(10)], substituted "an Archer" for "a Archer".

Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(6)],

substituted "Archer MSA" for "medical savings account".

Subsec. (d). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.

202(a)(6), (b)(2)(C), (6)], substituted "Archer MSAs" for "medical

savings accounts" in heading, "Archer MSAs" for "medical savings

accounts" in introductory provisions, and "Archer MSA" for "medical

savings account" in concluding provisions.

1998 - Pub. L. 105-206, Sec. 6023(18)(A), amended section

catchline generally. Prior to amendment, catchline read as follows:

"Tax on excess contributions to individual retirement accounts,

medical savings accounts, certain section 403(b) contracts, and

certain individual retirement annuities".

Subsec. (b)(1)(A). Pub. L. 105-206, Sec. 6005(b)(8)(B)(i),

inserted "a contribution to a Roth IRA or" after "other than".

Subsec. (b)(2)(C). Pub. L. 105-206, Sec. 6005(b)(8)(B)(ii),

inserted "(including the amount contributed to a Roth IRA)" after

"annuities".

Subsec. (e)(1). Pub. L. 105-206, Sec. 6004(d)(10)(A), reenacted

heading without change and amended text of par. (1) generally.

Prior to amendment, text read as follows: "In the case of education

individual retirement accounts maintained for the benefit of any 1

beneficiary, the term 'excess contributions' means -

"(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). Pub. L. 105-206, Sec. 6004(d)(10)(B),

redesignated subpar. (C) as (B) and struck out former subpar. (B)

which read as follows: "Any contribution described in section

530(b)(2)(B) to a qualified State tuition program."

Subsec. (f). Pub. L. 105-206, Sec. 6005(b)(8)(C), made technical

amendment to directory language of Pub. L. 105-34, Sec. 302(b). See

1997 Amendment note below.

Subsec. (f)(1)(A). Pub. L. 105-206, Sec. 6005(b)(8)(A)(i),

substituted "Roth IRAs" for "such accounts".

Subsec. (f)(2)(B). Pub. L. 105-206, Sec. 6005(b)(8)(A)(ii),

substituted "by the individual to all individual retirement plans"

for "to the accounts".

1997 - Subsec. (a)(4). Pub. L. 105-34, Sec. 213(d)(1), added par.

(4).

Subsec. (d). Pub. L. 105-33 inserted "or section 138(c)(3)" after

"section 220(f)(3)" in concluding provisions.

Subsec. (e). Pub. L. 105-34, Sec. 213(d)(2), added subsec. (e).

Subsec. (f). Pub. L. 105-34, Sec. 302(b), as amended by Pub. L.

105-206, Sec. 6005(b)(8)(C), added subsec. (f).

1996 - Pub. L. 104-191, Sec. 301(e)(1), inserted "medical savings

accounts," after "accounts," in section catchline.

Subsec. (a). Pub. L. 104-191, Sec. 301(e)(1)-(3), struck out "or"

at end of par. (1), added par. (2), and redesignated former par.

(2) as (3).

Subsec. (b)(1)(A). Pub. L. 104-188, Sec. 1704(t)(72), provided

that section 521(b)(41) of Pub. L. 102-318 shall be applied as if

"section" appeared instead of "sections" in the material proposed

to be stricken. See 1992 Amendment note below.

Pub. L. 104-188, Sec. 1704(t)(70), substituted "section" for

"sections".

Subsec. (d). Pub. L. 104-191, Sec. 301(e)(4), added subsec. (d).

1992 - Subsec. (b)(1)(A). Pub. L. 102-318, which directed the

substitution of "sections 402(c)" for "sections 402(a)(5),

402(a)(7)", was executed by substituting "sections 402(c)" for

"section 402(a)(5), 402(a)(7)". See 1996 Amendment note above.

1988 - Subsec. (b). Pub. L. 100-647 substituted "shall be

computed without regard to section 219(g)" for "(after application

of section 408(o)(2)(B)(ii)) shall be increased by the

nondeductible limit under section 408(o)(2)(B)" in last sentence.

1986 - Subsec. (b). Pub. L. 99-514, Sec. 1102(b)(1), inserted at

end "For purposes of paragraphs (1)(B) and (2)(C), the amount

allowable as a deduction under section 219 (after application of

section 408(o)(2)(B)(ii)) shall be increased by the nondeductible

limit under section 408(o)(2)(B)."

Pub. L. 99-514, Sec. 1848(f), in introductory provisions,

substituted "or individual retirement annuities" for ", individual

retirement annuities, or bonds", in par. (1)(A), substituted

"(other than a rollover contribution described in section

402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8), or 408(d)(3)), over"

for "or bonds (other than a rollover contribution described in

section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8), 405(d)(3), or

408(d)(3)), over", and in par. (2)(A), struck out "or bonds" after

"for the annuities".

1984 - Pub. L. 98-369, Sec. 491(d)(55), substituted "and certain

individual retirement annuities" for "certain individual retirement

annuities, and certain retirement bonds" in section catchline.

Subsec. (a). Pub. L. 98-369, Sec. 491(d)(41), inserted "or" at

end of par. (1), struck out "or" at end of par. (2), struck out

par. (3) which imposed a tax in the case of a retirement bond,

within the meaning of section 409, established for the benefit of

any individual, and in the concluding provision substituted "or

annuity" for ", annuity, or bond" and "or annuities" for ",

annuities, or bonds".

Subsec. (b). Pub. L. 98-369, Sec. 491(d)(43), substituted in

provision following par. (2)(C) "or the individual retirement

annuity" for ", individual retirement annuity, or bond".

Subsec. (b)(1)(A). Pub. L. 98-369, Sec. 491(d)(42), which

directed the amendment of subpar. (A) by substituting "and

408(d)(3)" for "408(d)(3), and 409(b)(3)(C)" was executed, as the

probable intent of Congress, by substituting "or 408(d)(3))" for

"408(d)(3)), or 409(b)(3)(C)".

Subsec. (c)(1). Pub. L. 98-369, Sec. 491(d)(44), substituted "or

408(d)(3)(A)(iii)" for ", 408(d)(3)(A)(iii), or 409(b)(3)(C)".

1981 - Subsec. (a). Pub. L. 97-34, Sec. 311(h)(9), substituted

"The tax imposed by this subsection shall be paid by such

individual" for "The tax imposed by this subsection shall be paid

by the individual to whom a deduction is allowed for the taxable

year under section 219 (determined without regard to subsection

(b)(1) thereof) or section 220 (determined without regard to

subsection (b)(1) thereof), whichever is appropriate".

Subsec. (b)(1)(A). Pub. L. 97-34, Sec. 313(b)(2), inserted

"405(d)(3)," after "403(b)(8),".

Subsec. (b)(1)(B). Pub. L. 97-34, Sec. 311(h)(7), substituted

"section 219" for "section 219 or 220".

Subsec. (b)(2)(C). Pub. L. 97-34, Sec. 311(h)(7), (10),

substituted "section 219" for "section 219 or 220", and "section

219(f)(6)" for "sections 219(c)(5) and 220(c)(6)".

1980 - Subsec. (b)(1)(A). Pub. L. 96-222, Sec. 101(a)(14)(B),

inserted reference to section 402(a)(7).

Subsec. (c)(1). Pub. L. 96-222, Sec. 101(a)(13)(C), substituted

"409(b)(3)(C)" for "409(d)(3)(C)".

1978 - Subsec. (b)(1)(A). Pub. L. 95-600, Sec. 156(c)(3),

inserted reference to section 403(b)(8).

Subsec. (b)(2). Pub. L. 95-600, Sec. 157(b)(3), substituted

"reduced by the sum of - " for "reduced by the excess (if any) of",

struck out "the maximum amount allowable as a deduction under

section 219 or 220 for the taxable year over the amount contributed

to the accounts or for the annuities or bonds for the taxable years

and reduced by the sum of the distributions out of the account (for

the taxable year and all prior taxable years) which were included

in the gross income of the payee under section 408(d)(1)" in

provision preceding par. (A), and added subpars. (A), (B), and (C).

Subsec. (b). Pub. L. 95-600, Secs. 157(j)(1), 701(aa)(1), struck

out in last sentence "if such distribution consists of an excess

contribution solely because of employer contributions to a plan or

contract described in section 219(b)(2) or by reason of the

application of section 219(b)(1) (without regard to the $1,500

limitation) or section 220(b)(1) (without regard to the $1,750

limitation) and only if such distribution does not exceed the

excess of $1,500 or $1,750 if applicable, over the amount described

in paragraph (1)(B)" after "as an amount not contributed".

Subsec. (c)(1). Pub. L. 95-600, Sec. 156(c)(5), inserted "(other

than a rollover contribution described in section 403(b)(8),

408(d)(3)(A)(iii), or 409(d)(3)(C))" after "account".

1976 - Subsec. (a)(3). Pub. L. 94-455, Secs. 1501(b)(8)(A),

1904(a)(22)(A), substituted "the individual to whom a deduction is

allowed for the taxable year under section 219 (determined without

regard to subsection (b)(1) thereof) or section 220 (determined

without regard to subsection (b)(1) thereof), whichever is

appropriate" for "such individual", effective for taxable years

beginning after December 31, 1976 and substituted "such individual"

for "the individual to whom a deduction is allowed for the taxable

year under section 219 (determined without regard to subsection

(b)(1) thereof) or section 220 (determined without regard to

subsection (b)(1) thereof), whichever is appropriate", effective

for the first day of the first month which begins more than 90 days

after Oct. 4, 1976.

Subsec. (b)(1)(B). Pub. L. 94-455, Sec. 1501(b)(8)(B), inserted

"or 220" after "under section 219".

Subsec. (b)(2). Pub. L. 94-455, Sec. 1501(b)(8)(C), inserted "or

220" after "under section 219" and "the taxable year and" before

"all prior taxable years" and struck out provisions relating to the

treatment of contributions out of individual retirement accounts,

annuities or bonds to which section 408(d)(4) applied.

Subsec. (c). Pub. L. 94-455, Sec. 1904(a)(22)(B), substituted

"subsection (a)(2)" for "subsection (a)(3)" in provisions preceding

par. (1).

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS

Amendment by Pub. L. 107-22 effective July 26, 2001, see section

1(c) of Pub. L. 107-22, set out as a note under section 26 of this

title.

Amendment by section 401(a)(2), (g)(2)(D) of Pub. L. 107-16

applicable to taxable years beginning after Dec. 31, 2001, see

section 401(h) of Pub. L. 107-16, set out as a note under section

25A of this title.

Amendment by section 402(a)(4)(A) of Pub. L. 107-16 applicable to

taxable years beginning after Dec. 31, 2001, see section 402(h) of

Pub. L. 107-16, set out as a note under section 72 of this title.

Amendment by section 641(e)(11) of Pub. L. 107-16 applicable to

distributions after Dec. 31, 2001, see section 641(f)(1) of Pub. L.

107-16, set out as a note under section 402 of this title.

Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or

limitation years beginning after Dec. 31, 2010, and the Internal

Revenue Code of 1986 to be applied and administered to such years

as if such amendment had never been enacted, see section 901 of

Pub. L. 107-16, set out as a note under section 1 of this title.

EFFECTIVE DATE OF 1998 AMENDMENT

Amendment by section 6023(18)(A) of Pub. L. 105-206 effective

July 22, 1998, see section 6023(32) of Pub. L. 105-206, set out as

a note under section 34 of this title.

Amendment by sections 6004(d)(10) and 6005(b)(8) of Pub. L.

105-206 effective, except as otherwise provided, as if included in

the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34,

to which such amendment relates, see section 6024 of Pub. L.

105-206, set out as a note under section 1 of this title.

EFFECTIVE DATE OF 1997 AMENDMENTS

Amendment by section 213(d) of Pub. L. 105-34 applicable to

taxable years beginning after Dec. 31, 1997, see section 213(f) of

Pub. L. 105-34, set out as a note under section 26 of this title.

Amendment by section 302(b) of Pub. L. 105-34 applicable to

taxable years beginning after Dec. 31, 1997, see section 302(f) of

Pub. L. 105-34, set out as a note under section 219 of this title.

Amendment by Pub. L. 105-33 applicable to taxable years beginning

after Dec. 31, 1998, see section 4006(c) of Pub. L. 105-33, set out

as an Effective Date note under section 138 of this title.

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by Pub. L. 104-191 applicable to taxable years

beginning after Dec. 31, 1996, see section 301(j) of Pub. L.

104-191, set out as a note under section 62 of this title.

EFFECTIVE DATE OF 1992 AMENDMENT

Amendment by Pub. L. 102-318 applicable to distributions after

Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a

note under section 402 of this title.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-647 effective, except as otherwise

provided, as if included in the provision of the Tax Reform Act of

1986, Pub. L. 99-514, to which such amendment relates, see section

1019(a) of Pub. L. 100-647, set out as a note under section 1 of

this title.

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 1102(b)(1) of Pub. L. 99-514 applicable to

contributions and distributions for taxable years beginning after

Dec. 31, 1986, see section 1102(g) of Pub. L. 99-514, set out as a

note under section 219 of this title.

Amendment by section 1848(f) of Pub. L. 99-514 effective, except

as otherwise provided, as if included in the provisions of the Tax

Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment

relates, see section 1881 of Pub. L. 99-514, set out as a note

under section 48 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-369 applicable to obligations issued

after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98-369, set

out as a note under section 62 of this title.

EFFECTIVE DATE OF 1981 AMENDMENT

Amendment by section 311(h)(7), (9), (10) of Pub. L. 97-34

applicable to taxable years beginning after Dec. 31, 1981, see

section 311(i)(1) of Pub. L. 97-34, set out as a note under section

219 of this title.

Amendment by section 313(b)(2) of Pub. L. 97-34 applicable to

redemptions after Aug. 13, 1981, in taxable years ending after such

date, see section 313(c) of Pub. L. 97-34, set out as a note under

section 219 of this title.

EFFECTIVE DATE OF 1980 AMENDMENT

Amendment by Pub. L. 96-222 effective, except as otherwise

provided, as if it had been included in the provision of the

Revenue Act of 1978, Pub. L. 95-600, to which such amendment

relates, see section 201 of Pub. L. 96-222, set out as a note under

section 22 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by section 156(c)(3), (5) of Pub. L. 95-600 applicable

to distributions or transfers made after Dec. 31, 1977, in taxable

years beginning after such date, see section 156(d) of Pub. L.

95-600, set out as a note under section 403 of this title.

Amendment by section 157(b)(3) of Pub. L. 95-600 applicable to

determination of deductions for taxable years beginning after Dec.

31, 1975, see section 157(b)(4)(A) of Pub. L. 95-600, set out as a

note under section 219 of this title.

Section 157(j)(2) of Pub. L. 95-600 provided that: "The amendment

made by paragraph (1) [amending this section] shall apply to

contributions made for taxable years beginning after December 31,

1977."

Section 701(aa)(2) of Pub. L. 95-600 provided that: "The

amendment made by paragraph (1) [amending this section] shall apply

as if included in section 1501 of the Tax Reform Act of 1976

[section 1501 of Pub. L. 94-455] at the time of the enactment of

such Act [Oct. 4, 1976]."

Section 703(j)(13) of Pub. L. 95-600 provided that:

"Notwithstanding section 1904(d) of the Tax Reform Act of 1976

[Pub. L. 94-455, set out as an Effective Date of 1976 Amendment

note under section 4041 of this title], the amendment made by

section 1904(a)(22)(A) of such Act [amending this section] shall

take effect on the date of the enactment of such Act [Oct. 4,

1976]."

EFFECTIVE DATE OF 1976 AMENDMENT

Amendment by section 1501(b)(8) of Pub. L. 94-455 applicable to

taxable years beginning after Dec. 31, 1976, see section 1501(d) of

Pub. L. 94-455, set out as a note under section 62 of this title.

Amendment by section 1904(a)(22) of Pub. L. 94-455 effective on

first day of first month which begins more than 90 days after Oct.

4, 1976, see section 1904(d) of Pub. L. 94-455, set out as a note

under section 4041 of this title.

EFFECTIVE DATE

Section 2002(i)(2) of Pub. L. 93-406 provided that: "The

amendments made by subsections (d) through (h) except subsection

(g)(5) and (6) [enacting this section and sections 4974 and 6693 of

this title and amending sections 37, 46, 50, 56, 72, 801, 805, 901,

3401, and 6047 of this title] shall take effect on January 1,

1975."

PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994

For provisions directing that if any amendments made by subtitle

B [Secs. 521-523] of title V of Pub. L. 102-318 require an

amendment to any plan, such plan amendment shall not be required to

be made before the first plan year beginning on or after Jan. 1,

1994, see section 523 of Pub. L. 102-318, set out as a note under

section 401 of this title.

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 [Secs. 1101-1147 and 1171-1177] or

title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an

amendment to any plan, such plan amendment shall not be required to

be made before the first plan year beginning on or after Jan. 1,

1989, see section 1140 of Pub. L. 99-514, as amended, set out as a

note under section 401 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 219, 408, 6058 of this

title.

-End-

-CITE-

26 USC Sec. 4974 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

Sec. 4974. Excise tax on certain accumulations in qualified

retirement plans

-STATUTE-

(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 50 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.

-SOURCE-

(Added Pub. L. 93-406, title II, Sec. 2002(e), Sept. 2, 1974, 88

Stat. 967; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),

Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95-600, title I, Sec.

157(i)(1), Nov. 6, 1978, 92 Stat. 2808; Pub. L. 99-514, title XI,

Sec. 1121(a)(1), title XVIII, Sec. 1852(a)(7)(B), (C), Oct. 22,

1986, 100 Stat. 2464, 2866.)

-MISC1-

AMENDMENTS

1986 - Pub. L. 99-514, Sec. 1121(a)(1), amended section

generally, substituting provisions imposing an excise tax on

certain accumulations in qualified retirement plans for provisions

imposing an excise tax on certain accumulations in individual

retirement accounts and annuities.

Subsec. (a). Pub. L. 99-514, Sec. 1852(a)(7)(B), substituted

"section 408(a)(6) or 408(b)(3)" for "section 408(a)(6) or (7), or

408(b)(3) or (4)".

Subsec. (b). Pub. L. 99-514, Sec. 1852(a)(7)(C), substituted

"section 408(a)(6) or 408(b)(3)" for "section 408(a)(6) or (7) or

408(b)(3) or (4)".

1978 - Subsec. (c). Pub. L. 95-600 added subsec. (c).

1976 - Subsec. (b). Pub. L. 94-455 struck out "or his delegate"

after "Secretary".

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 1121(a)(1) of Pub. L. 99-514 applicable to

years beginning after Dec. 31, 1988, with special provisions for

plans maintained pursuant to collective bargaining agreements

ratified before Mar. 1, 1986, and transition rules, see section

1121(d) of Pub. L. 99-514, set out as a note under section 401 of

this title.

Amendment by section 1852(a)(7)(B), (C) of Pub. L. 99-514

effective, except as otherwise provided, as if included in the

provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,

to which such amendment relates, see section 1881 of Pub. L.

99-514, set out as a note under section 48 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Section 157(i)(2) of Pub. L. 95-600 provided that: "The amendment

made by paragraph (1) [amending this section] shall apply to

taxable years beginning after December 31, 1975."

EFFECTIVE DATE

Section effective Jan. 1, 1975, see section 2002(i)(2) of Pub. L.

93-406, set out as an Effective Date note under section 4973 of

this title.

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 [Secs. 1101-1147 and 1171-1177] or

title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an

amendment to any plan, such plan amendment shall not be required to

be made before the first plan year beginning on or after Jan. 1,

1989, see section 1140 of Pub. L. 99-514, as amended, set out as a

note under section 401 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 25B, 72, 408, 457, 6058

of this title; title 23 section 181; title 49 section 41762.

-End-

-CITE-

26 USC Sec. 4975 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle D - Miscellaneous Excise Taxes

CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS

-HEAD-

Sec. 4975. Tax on prohibited transactions

-STATUTE-

(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

interests 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.

(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 an (!1) 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);

or

(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).

(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 Coverdell education savings account described in

section 530, or

(F) 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.

(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.

-SOURCE-

(Added Pub. L. 93-406, title II, Sec. 2003(a), Sept. 2, 1974, 88

Stat. 971; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),

Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95-600, title I, Sec.

141(f)(5), (6), Nov. 6, 1978, 92 Stat. 2795; Pub. L. 96-222, title

I, Sec. 101(a)(7)(C), (K), (L)(iv)(III), (v)(XI), Apr. 1, 1980, 94

Stat. 198-201; Pub. L. 96-364, title II, Secs. 208(b), 209(b),

Sept. 26, 1980, 94 Stat. 1289, 1290; Pub. L. 96-596, Sec.

2(a)(1)(K),(L), (2)(I), (3)(F), Dec. 24, 1980, 94 Stat. 3469, 3471;

Pub. L. 97-448, title III, Sec. 305(d)(5), Jan. 12, 1983, 96 Stat.

2400; Pub. L. 98-369, div. A, title IV, Sec. 491(d)(45), (46),

(e)(7), (8), July 18, 1984, 98 Stat. 851-853; Pub. L. 99-514, title

XI, Sec. 1114(b)(15)(A), title XVIII, Secs. 1854(f)(3)(A),

1899A(51), Oct. 22, 1986, 100 Stat. 2452, 2882, 2961; Pub. L.

101-508, title XI, Sec. 11701(m), Nov. 5, 1990, 104 Stat. 1388-513;

Pub. L. 104-188, title I, Secs. 1453(a), 1702(g)(3), Aug. 20, 1996,

110 Stat. 1817, 1873; Pub. L. 104-191, title III, Sec. 301(f), Aug.

21, 1996, 110 Stat. 2051; Pub. L. 105-34, title II, Sec. 213(b),

title X, Sec. 1074(a), title XV, Secs. 1506(b)(1), 1530(c)(10),

title XVI, Sec. 1602(a)(5), Aug. 5, 1997, 111 Stat. 816, 949, 1065,

1079, 1094; Pub. L. 105-206, title VI, Sec. 6023(19), July 22,

1998, 112 Stat. 825; Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.

202(a)(7), (b)(7), (10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628,

2763A-629; Pub. L. 107-16, title VI, Secs. 612(a), 656(b), June 7,

2001, 115 Stat. 100, 134; Pub. L. 107-22, Sec. 1(b)(1)(D), (3)(D),

July 26, 2001, 115 Stat. 197.)

-STATAMEND-

AMENDMENT OF SECTION

For termination of amendment by section 901 of Pub. L. 107-16,

see Effective and Termination Dates of 2001 Amendment note below.

-REFTEXT-

REFERENCES IN TEXT

The Employee Retirement Income Security Act of 1974, referred to

in subsecs. (c)(2), (d)(12) to (15), (e)(3), (9)(B), (g)(1), and

(i) is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as amended.

Part 1 of subtitle E of title IV of such Act is classified

generally to part 1 (29 U.S.C. 1381 et seq.) of subtitle E of

subchapter III of chapter 18 of Title 29, Labor. Sections 401, 405,

406, 408, 3003, 4044, 4223, and 4231 of such Act are classified to

sections 1101, 1105, 1106, 1108, 1203, 1344, 1403, and 1411,

respectively, of Title 29. For complete classification of this Act

to the Code, see Short Title note set out under section 1001 of

Title 29 and Tables.

The Investment Company Act of 1940, referred to in subsecs.

(e)(8) and (g), is title I of act Aug. 22, 1940, ch. 686, 54 Stat.

789, as amended, which is classified generally to subchapter I

(Sec. 80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade.

For complete classification of this Act to the Code, see section

80a-51 of Title 15 and Tables.

-MISC1-

AMENDMENTS

2001 - Subsec. (c)(5). Pub. L. 107-22, Sec. 1(b)(1)(D), (3)(D),

in heading, substituted "Coverdell education savings" for

"education individual retirement" and in text, substituted "a

Coverdell education savings" for "an education individual

retirement".

Subsec. (e)(1)(E). Pub. L. 107-22, Sec. 1(b)(1)(D), substituted

"a Coverdell education savings" for "an education individual

retirement".

Subsec. (e)(7). Pub. L. 107-16, Secs. 656(b), 901, temporarily

inserted ", section 409(p)," after "409(n)" in concluding

provisions. See Effective and Termination Dates of 2001 Amendment

note below.

Subsec. (f)(6)(B)(iii). Pub. L. 107-16, Secs. 612(a), 901,

temporarily added cl. (iii). See Effective and Termination Dates of

2001 Amendment note below.

2000 - Subsec. (c)(4). Pub. L. 106-554, Sec. 1(a)(7) [title II,

Sec. 202(b)(10)], substituted "an Archer" for "a Archer".

Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(7), (b)(7)],

substituted "Archer MSAs" for "medical savings accounts" in heading

and "Archer MSA" for "medical savings account" in text.

Subsec. (e)(1)(D). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.

202(b)(10)], substituted "an Archer" for "a Archer".

Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(7)],

substituted "Archer MSA" for "medical savings account".

1998 - Subsec. (c)(3). Pub. L. 105-206, Sec. 6023(19)(A),

substituted "exempt from the tax" for "exempt for the tax".

Subsec. (i). Pub. L. 105-206, Sec. 6023(19)(B), substituted

"Secretary of the Treasury" for "Secretary of Treasury".

1997 - Subsec. (a). Pub. L. 105-34, Sec. 1074(a), substituted "15

percent" for "10 percent".

Subsec. (c)(4). Pub. L. 105-34, Sec. 1602(a)(5), substituted "if

section 220(e)(2) applies to such transaction." for "if, with

respect to such transaction, the account ceases to be a medical

savings account by reason of the application of section 220(e)(2)

to such account."

Subsec. (c)(5). Pub. L. 105-34, Sec. 213(b)(2), added par. (5).

Subsec. (d). Pub. L. 105-34, Sec. 1506(b)(1)(B)(ii), struck out

concluding provisions which read as follows: "The exemptions

provided by this subsection (other than paragraphs (9) and (12))

shall not apply to any transaction with respect to 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)) in which a plan

directly or indirectly lends any part of the corpus or income of

the plan to, pays any compensation for personal services rendered

to the plan to, or 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 a

corporation controlled by any such owner-employee through the

ownership, directly or indirectly, of 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. For purposes of the preceding

sentence, a shareholder-employee (as defined in section 1379, as in

effect on the day before the date of the enactment of the

Subchapter S Revision Act of 1982), a participant or beneficiary of

an individual retirement account or an individual retirement

annuity (as defined in section 408), and an employer or association

of employees which establishes such an account or annuity under

section 408(c) shall be deemed to be an owner-employee."

Pub. L. 105-34, Sec. 1506(b)(1)(B)(i), substituted "Except as

provided in subsection (f)(6), the prohibitions" for "The

prohibitions" in introductory provisions.

Subsec. (e)(1)(D) to (F). Pub. L. 105-34, Sec. 213(b)(1), struck

out "or" at end of subpar. (D), added subpar. (E), and redesignated

former subpar. (E) as (F).

Subsec. (e)(7). Pub. L. 105-34, Sec. 1530(c)(10), inserted "and

section 664(g)" after "section 409(n)" in concluding provisions.

Subsec. (f)(6). Pub. L. 105-34, Sec. 1506(b)(1)(A), added par.

(6).

1996 - Subsec. (a). Pub. L. 104-188, Sec. 1453(a), substituted

"10 percent" for "5 percent".

Subsec. (c)(4). Pub. L. 104-191, Sec. 301(f)(1), added par. (4).

Subsec. (d)(13). Pub. L. 104-188, Sec. 1702(g)(3), substituted

"408(b)(12)" for "408(b)".

Subsec. (e)(1). Pub. L. 104-191, Sec. 301(f)(2), reenacted

heading without change and amended text generally. Prior to

amendment, text read as follows: "For purposes of this section, the

term 'plan' means 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), an individual

retirement account described in section 408(a) or an individual

retirement annuity described in section 408(b) (or a trust, plan,

account, or annuity which, at any time, has been determined by the

Secretary to be such a trust, plan, or account)."

1990 - Subsec. (d)(13). Pub. L. 101-508 inserted before semicolon

at end "or which is exempt from section 406 of such Act by reason

of section 408(b) of such Act".

1986 - Subsec. (d). Pub. L. 99-514, Sec. 1899A(51), inserted a

closing parenthesis after "and (12)" in second sentence.

Subsec. (d)(1)(B). Pub. L. 99-514, Sec. 1114(b)(15)(A),

substituted "highly compensated employees (within the meaning of

section 414(q))" for "highly compensated employees, officers, or

shareholders".

Subsec. (e)(7). Pub. L. 99-514, Sec. 1854(f)(3)(A), inserted ",

section 409(o), and, if applicable, section 409(n)" in last

sentence.

1984 - Subsec. (d). Pub. L. 98-369, Sec. 491(d)(45), substituted

in provision following par. (15) "or an individual retirement

annuity (as defined in section 408)" for ", individual retirement

annuity, or an individual retirement bond (as defined in section

408 or 409)".

Subsec. (e)(1). Pub. L. 98-369, Sec. 491(d)(46), struck out "or

405(a)" after "section 403(a)" and "or a retirement bond described

in section 409" after "section 408(b)", and substituted "or

annuity" for "annuity, or bond" and "or account" for "account, or

bond".

Subsec. (e)(7). Pub. L. 98-369, Sec. 491(e)(7), substituted

"section 409(h)" for "section 409A(h)", "section 409(e)(4)" for

"section 409A(e)(4)", and "section 409(e)" for "section 409A(e)".

Subsec. (e)(8). Pub. L. 98-369, Sec. 491(e)(8), substituted

"section 409(l)" for "section 409A(l)".

1983 - Subsec. (d). Pub. L. 97-448 inserted ", as in effect on

the day before the date of the enactment of the Subchapter S

Revision Act of 1982" after "section 1379" in last sentence.

1980 - Subsec. (b). Pub. L. 96-596, Sec. 2(a)(1)(K), substituted

"taxable period" for "correction period".

Subsec. (d)(14), (15). Pub. L. 96-364, Sec. 208(b), added pars.

(14) and (15).

Subsec. (e)(7). Pub. L. 96-222, Sec. 101(a)(7)(K), (L)(iv)(III),

(v)(XI), substituted references to an employee stock ownership

plan, for references to a leveraged employee stock ownership plan

wherever appearing therein, and substituted provisions relating to

treatment of a plan as an employee stock ownership plan, for

provisions relating to treatment of a plan as a leveraged employee

stock ownership plan.

Subsec. (e)(8). Pub. L. 96-222, Sec. 101(a)(7)(C), substituted

provisions defining "qualifying employer security" within the

meaning of section 409A(l), for provisions defining such term as

stock, or otherwise an equity security, or within the meaning of

section 503(e)(1) to (3).

Subsec. (e)(9). Pub. L. 96-364, Sec. 209(b), added par. (9).

Subsec. (f)(2)(B), (C). Pub. L. 96-596, Sec. 2(a)(2)(I), added

subpar. (B) and redesignated former subpar. (B) as (C).

Subsec. (f)(4)(B). Pub. L. 96-596, Sec. 2(a)(1)(L), substituted

"taxable period" for "correction period".

Subsec. (f)(6). Pub. L. 96-596, Sec. 2(a)(3)(F), struck out par.

(6), which defined correction period, with respect to a prohibited

transaction, as the period beginning on the date on which the

prohibited transaction occurs and ending 90 days after the date of

mailing of a notice of deficiency with respect to the tax imposed

by subsec. (b) of this section under section 6212 of this title,

extended by any period in which a deficiency cannot be assessed

under section 6213(a) of this title and any other period which the

Secretary determines is reasonable and necessary to bring about the

correction of the prohibited transaction.

1978 - Subsec. (d)(3). Pub. L. 95-600, Sec. 141(f)(6),

substituted "leveraged employee" for "employee".

Subsec. (e)(7). Pub. L. 95-600, Sec. 141(f)(5), substituted in

heading "Leveraged employee" for "Employee", and in text,

"leveraged employee" for "employee" and inserted provision that a

plan not be treated as a leveraged employee stock ownership plan

unless it meet the requirements of section 409A(e) and (h).

1976 - Subsecs. (c) to (f). Pub. L. 94-455 struck out "or his

delegate" after "Secretary" wherever appearing.

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS

Amendment by Pub. L. 107-22 effective July 26, 2001, see section

1(c) of Pub. L. 107-22, set out as a note under section 26 of this

title.

Pub. L. 107-16, title VI, Sec. 612(c), June 7, 2001, 115 Stat.

100, provided that: "The amendment made by this section [amending

this section and section 1108 of Title 29, Labor] shall apply to

years beginning after December 31, 2001."

Amendment by section 656(b) of Pub. L. 107-16 applicable to plan

years beginning after Dec. 31, 2004, except that in the case of any

employee stock ownership plan established after Mar. 14, 2001, or

established on or before such date if employer securities held by

the plan consist of stock in a corporation with respect to which an

election under section 1362(a) of this title is not in effect on

such date, amendment applicable to plan years ending after Mar. 14,

2001, see section 656(d) of Pub. L. 107-16, set out as a note under

section 409 of this title.

Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or

limitation years beginning after Dec. 31, 2010, and the Internal

Revenue Code of 1986 to be applied and administered to such years

as if such amendment had never been enacted, see section 901 of

Pub. L. 107-16, set out as a note under section 1 of this title.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by section 213(b) of Pub. L. 105-34 applicable to

taxable years beginning after Dec. 31, 1997, see section 213(f) of

Pub. L. 105-34, set out as a note under section 26 of this title.

Section 1074(b) of Pub. L. 105-34 provided that: "The amendment

made by this section [amending this section] shall apply to

prohibited transactions occurring after the date of the enactment

of this Act [Aug. 5, 1997]."

Amendment by section 1506(b)(1) of Pub. L. 105-34 applicable to

taxable years beginning after Dec. 31, 1997, see section 1506(c) of

Pub. L. 105-34, set out as a note under section 409 of this title.

Amendment by section 1530(c)(10) of Pub. L. 105-34 applicable to

transfers made by trusts to, or for the use of, an employee stock

ownership plan after Aug. 5, 1997, see section 1530(d) of Pub. L.

105-34, set out as a note under section 401 of this title.

Amendment by section 1602(a)(5) of Pub. L. 105-34 effective as if

included in the provisions of the Health Insurance Portability and

Accountability Act of 1996, Pub. L. 104-191, to which such

amendment relates, see section 1602(i) of Pub. L. 105-34, set out

as a note under section 26 of this title.

EFFECTIVE DATE OF 1996 AMENDMENTS

Amendment by Pub. L. 104-191 applicable to taxable years

beginning after Dec. 31, 1996, see section 301(j) of Pub. L.

104-191, set out as a note under section 62 of this title.

Section 1453(b) of Pub. L. 104-188 provided that: "The amendment

made by this section [amending this section] shall apply to

prohibited transactions occurring after the date of the enactment

of this Act [Aug. 20, 1996]."

Amendment by section 1702(g)(3) of Pub. L. 104-188 effective,

except as otherwise expressly provided, as if included in the

provision of the Revenue Reconciliation Act of 1990, Pub. L.

101-508, title XI, to which such amendment relates, see section

1702(i) of Pub. L. 104-188, set out as a note under section 38 of

this title.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by Pub. L. 101-508 effective, except as otherwise

provided, as if included in the provision of the Revenue

Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which

such amendment relates, see section 11701(n) of Pub. L. 101-508,

set out as a note under section 42 of this title.

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 1114(b)(15)(A) of Pub. L. 99-514 applicable

to years beginning after Dec. 31, 1988, see section 1114(c)(3) of

Pub. L. 99-514, set out as a note under section 414 of this title.

Amendment by section 1854(f)(3)(A) of Pub. L. 99-514 effective

Oct. 22, 1986, see section 1854(f)(4)(A) of Pub. L. 99-514, set out

as a note under section 409 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by section 491(d)(45), (46) of Pub. L. 98-369

applicable to obligations issued after Dec. 31, 1983, see section

491(f)(1) of Pub. L. 98-369, set out as a note under section 62 of

this title.

Amendment by section 491(e)(7), (8) of Pub. L. 98-369 effective

Jan. 1, 1984, see section 491(f)(3) of Pub. L. 98-369, set out as a

note under section 401 of this title.

EFFECTIVE DATE OF 1983 AMENDMENT

Amendment by Pub. L. 97-448 effective on date of enactment of

Subchapter S Revision Act of 1982 [Oct. 19, 1982], see section

311(c)(4) of Pub. L. 97-448, set out as a note under section 1368

of this title.

EFFECTIVE DATE OF 1980 AMENDMENTS

For effective date of amendment by Pub. L. 96-596 with respect to

any first tier tax and to any second tier tax, see section 2(d) of

Pub. L. 96-596, set out as an Effective Date note under section

4961 of this title.

Amendment by section 208(b) of Pub. L. 96-364 effective Sept. 26,

1980, see section 210(a) of Pub. L. 96-364, set out as an Effective

Date note under section 418 of this title.

Amendment by section 209(b) of Pub. L. 96-364 applicable to

taxable years ending after Sept. 26, 1980, see section 210(c) of

Pub. L. 96-364, set out as an Effective Date note under section 418

of this title.

Section 101(b)(1)(C) of Pub. L. 96-222 provided that: "The

amendment made by subparagraph (C) of subsection (a)(6) [probably

should be '(a)(7)', which amended this section] shall apply to

stock acquired after December 31, 1979."

Amendment by section 101(a)(7)(K), (L)(iv)(III), (v)(XI) of Pub.

L. 96-222 effective, except as otherwise provided, as if it had

been included in the provision of the Revenue Act of 1978, Pub. L.

95-600, to which such amendment relates, see section 201 of Pub. L.

96-222, set out as a note under section 32 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Section 141(h) of Pub. L. 95-600, as added by Pub. L. 96-222,

title I, Sec. 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; Pub. L.

99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"Paragraphs (5) and (6) of subsection (f) [section 141(f)(5), (6)

of Pub. L. 95-600] shall apply -

"(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

Section 2003(c) of Pub. L. 93-406, as amended by Pub. L. 99-514,

Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

"(1)(A) The amendments made by this section [enacting this

section and amending section 503 of this title] shall take effect

on January 1, 1975.

"(B) If, before the amendments made by this section [enacting

this section and amending section 503 of this title] take effect,

an organization described in section 401(a) of the Internal Revenue

Code of 1986 [formerly I.R.C. 1954] is denied exemption under

section 501(a) of such Code by reason of section 503 of such Code,

the denial of such exemption shall not apply if the disqualified

person elects (in such manner and at such time as the Secretary or

his delegate shall by regulations prescribe) to pay, with respect

to the prohibited transaction (within the meaning of section 503(b)

or (g)) which resulted in such denial of exemption, a tax in the

amount and in the manner provided with respect to the tax imposed

under section 4975 of such Code. An election made under this

subparagraph, once made, shall be irrevocable. The Secretary of the

Treasury or his delegate shall prescribe such regulations as may be

necessary to carry out the purposes of this subparagraph.

"(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