US (United States) Code. Title 26. Subtitle F: Procedure and Administration. Chapter 79: Definitions

Codificación normativa de EEUU (Estados Unidos). Legislación federal estadounidense # Internal revenue code

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-CITE-

26 USC CHAPTER 79 - DEFINITIONS 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

CHAPTER 79 - DEFINITIONS

-MISC1-

Sec.

7701. Definitions.

7702. Life insurance contract defined.

7702A. Modified endowment contract defined.

7702B. Treatment of qualified long-term care insurance.

7703. Determination of marital status.

7704. Certain publicly traded partnerships treated as

corporations.

AMENDMENTS

1996 - Pub. L. 104-191, title III, Sec. 321(e), Aug. 21, 1996,

110 Stat. 2059, added item 7702B.

1988 - Pub. L. 100-647, title V, Sec. 5012(c)(2), Nov. 10, 1988,

102 Stat. 3664, added item 7702A.

1987 - Pub. L. 100-203, title X, Sec. 10211(b), Dec. 22, 1987,

101 Stat. 1330-405, added item 7704.

1986 - Pub. L. 99-514, title XIII, Sec. 1301(j)(2)(B), Oct. 22,

1986, 100 Stat. 2657, added item 7703.

1984 - Pub. L. 98-369, div. A, title II, Sec. 221(c), July 18,

1984, 98 Stat. 772, added item 7702.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in sections 5002, 7801, 7851 of this

title.

-End-

-CITE-

26 USC Sec. 7701 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7701. Definitions

-STATUTE-

(a) When used in this title, where not otherwise distinctly

expressed or manifestly incompatible with the intent thereof -

(1) Person

The term "person" shall be construed to mean and include an

individual, a trust, estate, partnership, association, company or

corporation.

(2) Partnership and partner

The term "partnership" includes a syndicate, group, pool, joint

venture, or other unincorporated organization, through or by

means of which any business, financial operation, or venture is

carried on, and which is not, within the meaning of this title, a

trust or estate or a corporation; and the term "partner" includes

a member in such a syndicate, group, pool, joint venture, or

organization.

(3) Corporation

The term "corporation" includes associations, joint-stock

companies, and insurance companies.

(4) Domestic

The term "domestic" when applied to a corporation or

partnership means created or organized in the United States or

under the law of the United States or of any State unless, in the

case of a partnership, the Secretary provides otherwise by

regulations.

(5) Foreign

The term "foreign" when applied to a corporation or partnership

means a corporation or partnership which is not domestic.

(6) Fiduciary

The term "fiduciary" means a guardian, trustee, executor,

administrator, receiver, conservator, or any person acting in any

fiduciary capacity for any person.

(7) Stock

The term "stock" includes shares in an association, joint-stock

company, or insurance company.

(8) Shareholder

The term "shareholder" includes a member in an association,

joint-stock company, or insurance company.

(9) United States

The term "United States" when used in a geographical sense

includes only the States and the District of Columbia.

(10) State

The term "State" shall be construed to include the District of

Columbia, where such construction is necessary to carry out

provisions of this title.

(11) Secretary of the Treasury and Secretary

(A) Secretary of the Treasury

The term "Secretary of the Treasury" means the Secretary of

the Treasury, personally, and shall not include any delegate of

his.

(B) Secretary

The term "Secretary" means the Secretary of the Treasury or

his delegate.

(12) Delegate

(A) In general

The term "or his delegate" -

(i) when used with reference to the Secretary of the

Treasury, means any officer, employee, or agency of the

Treasury Department duly authorized by the Secretary of the

Treasury directly, or indirectly by one or more redelegations

of authority, to perform the function mentioned or described

in the context; and

(ii) when used with reference to any other official of the

United States, shall be similarly construed.

(B) Performance of certain functions in Guam or American Samoa

The term "delegate," in relation to the performance of

functions in Guam or American Samoa with respect to the taxes

imposed by chapters 1, 2, and 21, also includes any officer or

employee of any other department or agency of the United

States, or of any possession thereof, duly authorized by the

Secretary (directly, or indirectly by one or more redelegations

of authority) to perform such functions.

(13) Commissioner

The term "Commissioner" means the Commissioner of Internal

Revenue.

(14) Taxpayer

The term "taxpayer" means any person subject to any internal

revenue tax.

(15) Military or naval forces and armed forces of the United

States

The term "military or naval forces of the United States" and

the term "Armed Forces of the United States" each includes all

regular and reserve components of the uniformed services which

are subject to the jurisdiction of the Secretary of Defense, the

Secretary of the Army, the Secretary of the Navy, or the

Secretary of the Air Force, and each term also includes the Coast

Guard. The members of such forces include commissioned officers

and personnel below the grade of commissioned officers in such

forces.

(16) Withholding agent

The term "withholding agent" means any person required to

deduct and withhold any tax under the provisions of section 1441,

1442, 1443, or 1461.

(17) Husband and wife

As used in sections 152(b)(4), 682, and 2516, if the husband

and wife therein referred to are divorced, wherever appropriate

to the meaning of such sections, the term "wife" shall be read

"former wife" and the term "husband" shall be read "former

husband"; and, if the payments described in such sections are

made by or on behalf of the wife or former wife to the husband or

former husband instead of vice versa, wherever appropriate to the

meaning of such sections, the term "husband" shall be read "wife"

and the term "wife" shall be read "husband."

(18) International organization

The term "international organization" means a public

international organization entitled to enjoy privileges,

exemptions, and immunities as an international organization under

the International Organizations Immunities Act (22 U.S.C.

288-288f).

(19) Domestic building and loan association

The term "domestic building and loan association" means a

domestic building and loan association, a domestic savings and

loan association, and a Federal savings and loan association -

(A) which either (i) is an insured institution within the

meaning of section 401(a) (!1) of the National Housing Act (12

U.S.C., sec. 1724(a)), or (ii) is subject by law to supervision

and examination by State or Federal authority having

supervision over such associations;

(B) the business of which consists principally of acquiring

the savings of the public and investing in loans; and

(C) at least 60 percent of the amount of the total assets of

which (at the close of the taxable year) consists of -

(i) cash,

(ii) obligations of the United States or of a State or

political subdivision thereof, and stock or obligations of a

corporation which is an instrumentality of the United States

or of a State or political subdivision thereof, but not

including obligations the interest on which is excludable

from gross income under section 103,

(iii) certificates of deposit in, or obligations of, a

corporation organized under a State law which specifically

authorizes such corporation to insure the deposits or share

accounts of member associations,

(iv) loans secured by a deposit or share of a member,

(v) loans (including redeemable ground rents, as defined in

section 1055) secured by an interest in real property which

is (or, from the proceeds of the loan, will become)

residential real property or real property used primarily for

church purposes, loans made for the improvement of

residential real property or real property used primarily for

church purposes, provided that for purposes of this clause,

residential real property shall include single or multifamily

dwellings, facilities in residential developments dedicated

to public use or property used on a nonprofit basis for

residents, and mobile homes not used on a transient basis,

(vi) loans secured by an interest in real property located

within an urban renewal area to be developed for

predominantly residential use under an urban renewal plan

approved by the Secretary of Housing and Urban Development

under part A or part B of title I of the Housing Act of 1949,

as amended, or located within any area covered by a program

eligible for assistance under section 103 of the

Demonstration Cities and Metropolitan Development Act of

1966, as amended, and loans made for the improvement of any

such real property,

(vii) loans secured by an interest in educational, health,

or welfare institutions or facilities, including structures

designed or used primarily for residential purposes for

students, residents, and persons under care, employees, or

members of the staff of such institutions or facilities,

(viii) property acquired through the liquidation of

defaulted loans described in clause (v), (vi), or (vii),

(ix) loans made for the payment of expenses of college or

university education or vocational training, in accordance

with such regulations as may be prescribed by the Secretary,

(x) property used by the association in the conduct of the

business described in subparagraph (B), and

(xi) any regular or residual interest in a REMIC, and any

regular interest in a FASIT, but only in the proportion which

the assets of such REMIC or FASIT consist of property

described in any of the preceding clauses of this

subparagraph; except that if 95 percent or more of the assets

of such REMIC or FASIT are assets described in clauses (i)

through (x), the entire interest in the REMIC or FASIT shall

qualify.

At the election of the taxpayer, the percentage specified in

this subparagraph shall be applied on the basis of the average

assets outstanding during the taxable year, in lieu of the

close of the taxable year, computed under regulations

prescribed by the Secretary. For purposes of clause (v), if a

multifamily structure securing a loan is used in part for

nonresidential purposes, the entire loan is deemed a

residential real property loan if the planned residential use

exceeds 80 percent of the property's planned use (determined as

of the time the loan is made). For purposes of clause (v),

loans made to finance the acquisition or development of land

shall be deemed to be loans secured by an interest in

residential real property if, under regulations prescribed by

the Secretary, there is reasonable assurance that the property

will become residential real property within a period of 3

years from the date of acquisition of such land; but this

sentence shall not apply for any taxable year unless, within

such 3-year period, such land becomes residential real

property. For purposes of determining whether any interest in a

REMIC qualifies under clause (xi), any regular interest in

another REMIC held by such REMIC shall be treated as a loan

described in a preceding clause under principles similar to the

principles of clause (xi); except that, if such REMIC's are

part of a tiered structure, they shall be treated as 1 REMIC

for purposes of clause (xi).

(20) Employee

For the purpose of applying the provisions of section 79 with

respect to group-term life insurance purchased for employees, for

the purpose of applying the provisions of sections 104, 105, and

106 with respect to accident and health insurance or accident and

health plans, and for the purpose of applying the provisions of

subtitle A with respect to contributions to or under a stock

bonus, pension, profit-sharing, or annuity plan, and with respect

to distributions under such a plan, or by a trust forming part of

such a plan, and for purposes of applying section 125 with

respect to cafeteria plans, the term "employee" shall include a

full-time life insurance salesman who is considered an employee

for the purpose of chapter 21, or in the case of services

performed before January 1, 1951, who would be considered an

employee if his services were performed during 1951.

(21) Levy

The term "levy" includes the power of distraint and seizure by

any means.

(22) Attorney General

The term "Attorney General" means the Attorney General of the

United States.

(23) Taxable year

The term "taxable year" means the calendar year, or the fiscal

year ending during such calendar year, upon the basis of which

the taxable income is computed under subtitle A. "Taxable year"

means, in the case of a return made for a fractional part of a

year under the provisions of subtitle A or under regulations

prescribed by the Secretary, the period for which such return is

made.

(24) Fiscal year

The term "fiscal year" means an accounting period of 12 months

ending on the last day of any month other than December.

(25) Paid or incurred, paid or accrued

The terms "paid or incurred" and "paid or accrued" shall be

construed according to the method of accounting upon the basis of

which the taxable income is computed under subtitle A.

(26) Trade or business

The term "trade or business" includes the performance of the

functions of a public office.

(27) Tax Court

The term "Tax Court" means the United States Tax Court.

(28) Other terms

Any term used in this subtitle with respect to the application

of, or in connection with, the provisions of any other subtitle

of this title shall have the same meaning as in such provisions.

(29) Internal Revenue Code

The term "Internal Revenue Code of 1986" means this title, and

the term "Internal Revenue Code of 1939" means the Internal

Revenue Code enacted February 10, 1939, as amended.

(30) United States person

The term "United States person" means -

(A) a citizen or resident of the United States,

(B) a domestic partnership,

(C) a domestic corporation,

(D) any estate (other than a foreign estate, within the

meaning of paragraph (31)), and

(E) any trust if -

(i) a court within the United States is able to exercise

primary supervision over the administration of the trust, and

(ii) one or more United States persons have the authority

to control all substantial decisions of the trust.

(31) Foreign estate or trust

(A) Foreign estate

The term "foreign estate" means an estate the income of

which, from sources without the United States which is not

effectively connected with the conduct of a trade or business

within the United States, is not includible in gross income

under subtitle A.

(B) Foreign trust

The term "foreign trust" means any trust other than a trust

described in subparagraph (E) of paragraph (30).

(32) Cooperative bank

The term "cooperative bank" means an institution without

capital stock organized and operated for mutual purposes and

without profit, which -

(A) either -

(i) is an insured institution within the meaning of section

401(a) (!2) of the National Housing Act (12 U.S.C., sec.

1724(a)), or

(ii) is subject by law to supervision and examination by

State or Federal authority having supervision over such

institutions, and

(B) meets the requirements of subparagraphs (B) and (C) of

paragraph (19) of this subsection (relating to definition of

domestic building and loan association).

In determining whether an institution meets the requirements

referred to in subparagraph (B) of this paragraph, any reference

to an association or to a domestic building and loan association

contained in paragraph (19) shall be deemed to be a reference to

such institution.

(33) Regulated public utility

The term "regulated public utility" means -

(A) A corporation engaged in the furnishing or sale of -

(i) electric energy, gas, water, or sewerage disposal

services, or

(ii) transportation (not included in subparagraph (C)) on

an intrastate, suburban, municipal, or interurban electric

railroad, on an intrastate, municipal, or suburban trackless

trolley system, or on a municipal or suburban bus system, or

(iii) transportation (not included in clause (ii)) by motor

vehicle -

if the rates for such furnishing or sale, as the case may be,

have been established or approved by a State or political

subdivision thereof, by an agency or instrumentality of the

United States, by a public service or public utility commission

or other similar body of the District of Columbia or of any

State or political subdivision thereof, or by a foreign country

or an agency or instrumentality or political subdivision

thereof.

(B) A corporation engaged as a common carrier in the

furnishing or sale of transportation of gas by pipe line, if

subject to the jurisdiction of the Federal Energy Regulatory

Commission.

(C) A corporation engaged as a common carrier (i) in the

furnishing or sale of transportation by railroad, if subject to

the jurisdiction of the Surface Transportation Board, or (ii)

in the furnishing or sale of transportation of oil or other

petroleum products (including shale oil) by pipe line, if

subject to the jurisdiction of the Federal Energy Regulatory

Commission or if the rates for such furnishing or sale are

subject to the jurisdiction of a public service or public

utility commission or other similar body of the District of

Columbia or of any State.

(D) A corporation engaged in the furnishing or sale of

telephone or telegraph service, if the rates for such

furnishing or sale meet the requirements of subparagraph (A).

(E) A corporation engaged in the furnishing or sale of

transportation as a common carrier by air, subject to the

jurisdiction of the Secretary of Transportation.

(F) A corporation engaged in the furnishing or sale of

transportation by a water carrier subject to jurisdiction under

subchapter II of chapter 135 of title 49.

(G) A rail carrier subject to part A of subtitle IV of title

49, if (i) substantially all of its railroad properties have

been leased to another such railroad corporation or

corporations by an agreement or agreements entered into before

January 1, 1954, (ii) each lease is for a term of more than 20

years, and (iii) at least 80 percent or more of its gross

income (computed without regard to dividends and capital gains

and losses) for the taxable year is derived from such leases

and from sources described in subparagraphs (A) through (F),

inclusive. For purposes of the preceding sentence, an agreement

for lease of railroad properties entered into before January 1,

1954, shall be considered to be a lease including such term as

the total number of years of such agreement may, unless sooner

terminated, be renewed or continued under the terms of the

agreement, and any such renewal or continuance under such

agreement shall be considered part of the lease entered into

before January 1, 1954.

(H) A common parent corporation which is a common carrier by

railroad subject to part A of subtitle IV of title 49 if at

least 80 percent of its gross income (computed without regard

to capital gains or losses) is derived directly or indirectly

from sources described in subparagraphs (A) through (F),

inclusive. For purposes of the preceding sentence, dividends

and interest, and income from leases described in subparagraph

(G), received from a regulated public utility shall be

considered as derived from sources described in subparagraphs

(A) through (F), inclusive, if the regulated public utility is

a member of an affiliated group (as defined in section 1504)

which includes the common parent corporation.

The term "regulated public utility" does not (except as provided

in subparagraphs (G) and (H)) include a corporation described in

subparagraphs (A) through (F), inclusive, unless 80 percent or

more of its gross income (computed without regard to dividends

and capital gains and losses) for the taxable year is derived

from sources described in subparagraphs (A) through (F),

inclusive. If the taxpayer establishes to the satisfaction of the

Secretary that (i) its revenue from regulated rates described in

subparagraph (A) or (D) and its revenue derived from unregulated

rates are derived from the operation of a single interconnected

and coordinated system or from the operation of more than one

such system, and (ii) the unregulated rates have been and are

substantially as favorable to users and consumers as are the

regulated rates, then such revenue from such unregulated rates

shall be considered, for purposes of the preceding sentence, as

income derived from sources described in subparagraph (A) or (D).

[(34) Repealed. Pub. L. 98-369, div. A, title IV, Sec.

4112(b)(11), July 18, 1984, 98 Stat. 792]

(35) Enrolled actuary

The term "enrolled actuary" means a person who is enrolled by

the Joint Board for the Enrollment of Actuaries established under

subtitle C of the title III of the Employee Retirement Income

Security Act of 1974.

(36) Income tax return preparer

(A) In general

The term "income tax return preparer" means any person who

prepares for compensation, or who employs one or more persons

to prepare for compensation, any return of tax imposed by

subtitle A or any claim for refund of tax imposed by subtitle

A. For purposes of the preceding sentence, the preparation of a

substantial portion of a return or claim for refund shall be

treated as if it were the preparation of such return or claim

for refund.

(B) Exceptions

A person shall not be an "income tax return preparer" merely

because such person -

(i) furnishes typing, reproducing, or other mechanical

assistance,

(ii) prepares a return or claim for refund of the employer

(or of an officer or employee of the employer) by whom he is

regularly and continuously employed,

(iii) prepares as a fiduciary a return or claim for refund

for any person, or

(iv) prepares a claim for refund for a taxpayer in response

to any notice of deficiency issued to such taxpayer or in

response to any waiver of restriction after the commencement

of an audit of such taxpayer or another taxpayer if a

determination in such audit of such other taxpayer directly

or indirectly affects the tax liability of such taxpayer.

(37) Individual retirement plan

The term "individual retirement plan" means -

(A) an individual retirement account described in section

408(a), and

(B) an individual retirement annuity described in section

408(b).

(38) Joint return

The term "joint return" means a single return made jointly

under section 6013 by a husband and wife.

(39) Persons residing outside United States

If any citizen or resident of the United States does not reside

in (and is not found in) any United States judicial district,

such citizen or resident shall be treated as residing in the

District of Columbia for purposes of any provision of this title

relating to -

(A) jurisdiction of courts, or

(B) enforcement of summons.

(40) Indian tribal government

(A) In general

The term "Indian tribal government" means the governing body

of any tribe, band, community, village, or group of Indians, or

(if applicable) Alaska Natives, which is determined by the

Secretary, after consultation with the Secretary of the

Interior, to exercise governmental functions.

(B) Special rule for Alaska Natives

No determination under subparagraph (A) with respect to

Alaska Natives shall grant or defer any status or powers other

than those enumerated in section 7871. Nothing in the Indian

Tribal Governmental Tax Status Act of 1982, or in the

amendments made thereby, shall validate or invalidate any claim

by Alaska Natives of sovereign authority over lands or people.

(41) TIN

The term "TIN" means the identifying number assigned to a

person under section 6109.

(42) Substituted basis property

The term "substituted basis property" means property which is -

(A) transferred basis property, or

(B) exchanged basis property.

(43) Transferred basis property

The term "transferred basis property" means property having a

basis determined under any provision of subtitle A (or under any

corresponding provision of prior income tax law) providing that

the basis shall be determined in whole or in part by reference to

the basis in the hands of the donor, grantor, or other

transferor.

(44) Exchanged basis property

The term "exchanged basis property" means property having a

basis determined under any provision of subtitle A (or under any

corresponding provision of prior income tax law) providing that

the basis shall be determined in whole or in part by reference to

other property held at any time by the person for whom the basis

is to be determined.

(45) Nonrecognition transaction

The term "nonrecognition transaction" means any disposition of

property in a transaction in which gain or loss is not recognized

in whole or in part for purposes of subtitle A.

(46) Determination of whether there is a collective bargaining

agreement

In determining whether there is a collective bargaining

agreement between employee representatives and 1 or more

employers, the term "employee representatives" shall not include

any organization more than one-half of the members of which are

employees who are owners, officers, or executives of the

employer. An agreement shall not be treated as a collective

bargaining agreement unless it is a bona fide agreement between

bona fide employee representatives and 1 or more employers.

(b) Definition of resident alien and nonresident alien

(1) In general

For purposes of this title (other than subtitle B) -

(A) Resident alien

An alien individual shall be treated as a resident of the

United States with respect to any calendar year if (and only

if) such individual meets the requirements of clause (i), (ii),

or (iii):

(i) Lawfully admitted for permanent residence

Such individual is a lawful permanent resident of the

United States at any time during such calendar year.

(ii) Substantial presence test

Such individual meets the substantial presence test of

paragraph (3).

(iii) First year election

Such individual makes the election provided in paragraph

(4).

(B) Nonresident alien

An individual is a nonresident alien if such individual is

neither a citizen of the United States nor a resident of the

United States (within the meaning of subparagraph (A)).

(2) Special rules for first and last year of residency

(A) First year of residency

(i) In general

If an alien individual is a resident of the United States

under paragraph (1)(A) with respect to any calendar year, but

was not a resident of the United States at any time during

the preceding calendar year, such alien individual shall be

treated as a resident of the United States only for the

portion of such calendar year which begins on the residency

starting date.

(ii) Residency starting date for individuals lawfully

admitted for permanent residence

In the case of an individual who is a lawfully permanent

resident of the United States at any time during the calendar

year, but does not meet the substantial presence test of

paragraph (3), the residency starting date shall be the first

day in such calendar year on which he was present in the

United States while a lawful permanent resident of the United

States.

(iii) Residency starting date for individuals meeting

substantial presence test

In the case of an individual who meets the substantial

presence test of paragraph (3) with respect to any calendar

year, the residency starting date shall be the first day

during such calendar year on which the individual is present

in the United States.

(iv) Residency starting date for individuals making first

year election

In the case of an individual who makes the election

provided by paragraph (4) with respect to any calendar year,

the residency starting date shall be the 1st day during such

calendar year on which the individual is treated as a

resident of the United States under that paragraph.

(B) Last year of residency

An alien individual shall not be treated as a resident of the

United States during a portion of any calendar year if -

(i) such portion is after the last day in such calendar

year on which the individual was present in the United States

(or, in the case of an individual described in paragraph

(1)(A)(i), the last day on which he was so described),

(ii) during such portion the individual has a closer

connection to a foreign country than to the United States,

and

(iii) the individual is not a resident of the United States

at any time during the next calendar year.

(C) Certain nominal presence disregarded

(i) In general

For purposes of subparagraphs (A)(iii) and (B), an

individual shall not be treated as present in the United

States during any period for which the individual establishes

that he has a closer connection to a foreign country than to

the United States.

(ii) Not more than 10 days disregarded

Clause (i) shall not apply to more than 10 days on which

the individual is present in the United States.

(3) Substantial presence test

(A) In general

Except as otherwise provided in this paragraph, an individual

meets the substantial presence test of this paragraph with

respect to any calendar year (hereinafter in this subsection

referred to as the "current year") if -

(i) such individual was present in the United States on at

least 31 days during the calendar year, and

(ii) the sum of the number of days on which such individual

was present in the United States during the current year and

the 2 preceding calendar years (when multiplied by the

applicable multiplier determined under the following table)

equals or exceeds 183 days:

The applicable

In the case of days in: multiplier is:

Current year 1

1st preceding year 1/3

2nd preceding year 1/6

(B) Exception where individual is present in the United States

during less than one-half of current year and closer

connection to foreign country is established

An individual shall not be treated as meeting the substantial

presence test of this paragraph with respect to any current

year if -

(i) such individual is present in the United States on

fewer than 183 days during the current year, and

(ii) it is established that for the current year such

individual has a tax home (as defined in section 911(d)(3)

without regard to the second sentence thereof) in a foreign

country and has a closer connection to such foreign country

than to the United States.

(C) Subparagraph (B) not to apply in certain cases

Subparagraph (B) shall not apply to any individual with

respect to any current year if at any time during such year -

(i) such individual had an application for adjustment of

status pending, or

(ii) such individual took other steps to apply for status

as a lawful permanent resident of the United States.

(D) Exception for exempt individuals or for certain medical

conditions

An individual shall not be treated as being present in the

United States on any day if -

(i) such individual is an exempt individual for such day,

or

(ii) such individual was unable to leave the United States

on such day because of a medical condition which arose while

such individual was present in the United States.

(4) First-year election

(A) An alien individual shall be deemed to meet the

requirements of this subparagraph if such individual -

(i) is not a resident of the United States under clause (i)

or (ii) of paragraph (1)(A) with respect to a calendar year

(hereinafter referred to as the "election year"),

(ii) was not a resident of the United States under paragraph

(1)(A) with respect to the calendar year immediately preceding

the election year,

(iii) is a resident of the United States under clause (ii) of

paragraph (1)(A) with respect to the calendar year immediately

following the election year, and

(iv) is both -

(I) present in the United States for a period of at least

31 consecutive days in the election year, and

(II) present in the United States during the period

beginning with the first day of such 31-day period and ending

with the last day of the election year (hereinafter referred

to as the "testing period") for a number of days equal to or

exceeding 75 percent of the number of days in the testing

period (provided that an individual shall be treated for

purposes of this subclause as present in the United States

for a number of days during the testing period not exceeding

5 days in the aggregate, notwithstanding his absence from the

United States on such days).

(B) An alien individual who meets the requirements of

subparagraph (A) shall, if he so elects, be treated as a resident

of the United States with respect to the election year.

(C) An alien individual who makes the election provided by

subparagraph (B) shall be treated as a resident of the United

States for the portion of the election year which begins on the

1st day of the earliest testing period during such year with

respect to which the individual meets the requirements of clause

(iv) of subparagraph (A).

(D) The rules of subparagraph (D)(i) of paragraph (3) shall

apply for purposes of determining an individual's presence in the

United States under this paragraph.

(E) An election under subparagraph (B) shall be made on the

individual's tax return for the election year, provided that such

election may not be made before the individual has met the

substantial presence test of paragraph (3) with respect to the

calendar year immediately following the election year.

(F) An election once made under subparagraph (B) remains in

effect for the election year, unless revoked with the consent of

the Secretary.

(5) Exempt individual defined

For purposes of this subsection -

(A) In general

An individual is an exempt individual for any day if, for

such day, such individual is -

(i) a foreign government-related individual,

(ii) a teacher or trainee,

(iii) a student, or

(iv) a professional athlete who is temporarily in the

United States to compete in a charitable sports event

described in section 274(l)(1)(B).

(B) Foreign government-related individual

The term "foreign government-related individual" means any

individual temporarily present in the United States by reason

of -

(i) diplomatic status, or a visa which the Secretary (after

consultation with the Secretary of State) determines

represents full-time diplomatic or consular status for

purposes of this subsection,

(ii) being a full-time employee of an international

organization, or

(iii) being a member of the immediate family of an

individual described in clause (i) or (ii).

(C) Teacher or trainee

The term "teacher or trainee" means any individual -

(i) who is temporarily present in the United States under

subparagraph (J) or (Q) of section 101(15) of the Immigration

and Nationality Act (other than as a student), and

(ii) who substantially complies with the requirements for

being so present.

(D) Student

The term "student" means any individual -

(i) who is temporarily present in the United States -

(I) under subparagraph (F) or (M) of section 101(15) of

the Immigration and Nationality Act, or

(II) as a student under subparagraph (J) or (Q) of such

section 101(15), and

(ii) who substantially complies with the requirements for

being so present.

(E) Special rules for teachers, trainees, and students

(i) Limitation on teachers and trainees

An individual shall not be treated as an exempt individual

by reason of clause (ii) of subparagraph (A) for the current

year if, for any 2 calendar years during the preceding 6

calendar years, such person was an exempt person under clause

(ii) or (iii) of subparagraph (A). In the case of an

individual all of whose compensation is described in section

872(b)(3), the preceding sentence shall be applied by

substituting "4 calendar years" for "2 calendar years".

(ii) Limitation on students

For any calendar year after the 5th calendar year for which

an individual was an exempt individual under clause (ii) or

(iii) of subparagraph (A), such individual shall not be

treated as an exempt individual by reason of clause (iii) of

subparagraph (A), unless such individual establishes to the

satisfaction of the Secretary that such individual does not

intend to permanently reside in the United States and that

such individual meets the requirements of subparagraph

(D)(ii).

(6) Lawful permanent resident

For purposes of this subsection, an individual is a lawful

permanent resident of the United States at any time if -

(A) such individual has the status of having been lawfully

accorded the privilege of residing permanently in the United

States as an immigrant in accordance with the immigration laws,

and

(B) such status has not been revoked (and has not been

administratively or judicially determined to have been

abandoned).

(7) Presence in the United States

For purposes of this subsection -

(A) In general

Except as provided in subparagraph (B), (C), or (D), an

individual shall be treated as present in the United States on

any day if such individual is physically present in the United

States at any time during such day.

(B) Commuters from Canada or Mexico

If an individual regularly commutes to employment (or

self-employment) in the United States from a place of residence

in Canada or Mexico, such individual shall not be treated as

present in the United States on any day during which he so

commutes.

(C) Transit between 2 foreign points

If an individual, who is in transit between 2 points outside

the United States, is physically present in the United States

for less than 24 hours, such individual shall not be treated as

present in the United States on any day during such transit.

(D) Crew members temporarily present

An individual who is temporarily present in the United States

on any day as a regular member of the crew of a foreign vessel

engaged in transportation between the United States and a

foreign country or a possession of the United States shall not

be treated as present in the United States on such day unless

such individual otherwise engages in any trade or business in

the United States on such day.

(8) Annual statements

The Secretary may prescribe regulations under which an

individual who (but for subparagraph (B) or (D) of paragraph (3))

would meet the substantial presence test of paragraph (3) is

required to submit an annual statement setting forth the basis on

which such individual claims the benefits of subparagraph (B) or

(D) of paragraph (3), as the case may be.

(9) Taxable year

(A) In general

For purposes of this title, an alien individual who has not

established a taxable year for any prior period shall be

treated as having a taxable year which is the calendar year.

(B) Fiscal year taxpayer

If -

(i) an individual is treated under paragraph (1) as a

resident of the United States for any calendar year, and

(ii) after the application of subparagraph (A), such

individual has a taxable year other than a calendar year,

he shall be treated as a resident of the United States with

respect to any portion of a taxable year which is within such

calendar year.

(10) Coordination with section 877

If -

(A) an alien individual was treated as a resident of the

United States during any period which includes at least 3

consecutive calendar years (hereinafter referred to as the

"initial residency period"), and

(B) such individual ceases to be treated as a resident of the

United States but subsequently becomes a resident of the United

States before the close of the 3rd calendar year beginning

after the close of the initial residency period,

such individual shall be taxable for the period after the close

of the initial residency period and before the day on which he

subsequently became a resident of the United States in the manner

provided in section 877(b). The preceding sentence shall apply

only if the tax imposed pursuant to section 877(b) exceeds the

tax which, without regard to this paragraph, is imposed pursuant

to section 871.

(11) Regulations

The Secretary shall prescribe such regulations as may be

necessary or appropriate to carry out the purposes of this

subsection.

(c) Includes and including

The terms "includes" and "including" when used in a definition

contained in this title shall not be deemed to exclude other things

otherwise within the meaning of the term defined.

(d) Commonwealth of Puerto Rico

Where not otherwise distinctly expressed or manifestly

incompatible with the intent thereof, references in this title to

possessions of the United States shall be treated as also referring

to the Commonwealth of Puerto Rico.

(e) Treatment of certain contracts for providing services, etc.

For purposes of chapter 1 -

(1) In general

A contract which purports to be a service contract shall be

treated as a lease of property if such contract is properly

treated as a lease of property, taking into account all relevant

factors including whether or not -

(A) the service recipient is in physical possession of the

property,

(B) the service recipient controls the property,

(C) the service recipient has a significant economic or

possessory interest in the property,

(D) the service provider does not bear any risk of

substantially diminished receipts or substantially increased

expenditures if there is nonperformance under the contract,

(E) the service provider does not use the property

concurrently to provide significant services to entities

unrelated to the service recipient, and

(F) the total contract price does not substantially exceed

the rental value of the property for the contract period.

(2) Other arrangements

An arrangement (including a partnership or other pass-thru

entity) which is not described in paragraph (1) shall be treated

as a lease if such arrangement is properly treated as a lease,

taking into account all relevant factors including factors

similar to those set forth in paragraph (1).

(3) Special rules for contracts or arrangements involving solid

waste disposal, energy, and clean water facilities

(A) In general

Notwithstanding paragraphs (1) and (2), and except as

provided in paragraph (4), any contract or arrangement between

a service provider and a service recipient -

(i) with respect to -

(I) the operation of a qualified solid waste disposal

facility,

(II) the sale to the service recipient of electrical or

thermal energy produced at a cogeneration or alternative

energy facility, or

(III) the operation of a water treatment works facility,

and

(ii) which purports to be a service contract,

shall be treated as a service contract.

(B) Qualified solid waste disposal facility

For purposes of subparagraph (A), the term "qualified solid

waste disposal facility" means any facility if such facility

provides solid waste disposal services for residents of part or

all of 1 or more governmental units and substantially all of

the solid waste processed at such facility is collected from

the general public.

(C) Cogeneration facility

For purposes of subparagraph (A), the term "cogeneration

facility" means a facility which uses the same energy source

for the sequential generation of electrical or mechanical power

in combination with steam, heat, or other forms of useful

energy.

(D) Alternative energy facility

For purposes of subparagraph (A), the term "alternative

energy facility" means a facility for producing electrical or

thermal energy if the primary energy source for the facility is

not oil, natural gas, coal, or nuclear power.

(E) Water treatment works facility

For purposes of subparagraph (A), the term "water treatment

works facility" means any treatment works within the meaning of

section 212(2) of the Federal Water Pollution Control Act.

(4) Paragraph (3) not to apply in certain cases

(A) In general

Paragraph (3) shall not apply to any qualified solid waste

disposal facility, cogeneration facility, alternative energy

facility, or water treatment works facility used under a

contract or arrangement if -

(i) the service recipient (or a related entity) operates

such facility,

(ii) the service recipient (or a related entity) bears any

significant financial burden if there is nonperformance under

the contract or arrangement (other than for reasons beyond

the control of the service provider),

(iii) the service recipient (or a related entity) receives

any significant financial benefit if the operating costs of

such facility are less than the standards of performance or

operation under the contract or arrangement, or

(iv) the service recipient (or a related entity) has an

option to purchase, or may be required to purchase, all or a

part of such facility at a fixed and determinable price

(other than for fair market value).

For purposes of this paragraph, the term "related entity" has

the same meaning as when used in section 168(h).

(B) Special rules for application of subparagraph (A) with

respect to certain rights and allocations under the contract

For purposes of subparagraph (A), there shall not be taken

into account -

(i) any right of a service recipient to inspect any

facility, to exercise any sovereign power the service

recipient may possess, or to act in the event of a breach of

contract by the service provider, or

(ii) any allocation of any financial burden or benefits in

the event of any change in any law.

(C) Special rules for application of subparagraph (A) in the

case of certain events

(i) Temporary shut-downs, etc.

For purposes of clause (ii) of subparagraph (A), there

shall not be taken into account any temporary shut-down of

the facility for repairs, maintenance, or capital

improvements, or any financial burden caused by the

bankruptcy or similar financial difficulty of the service

provider.

(ii) Reduced costs

For purposes of clause (iii) of subparagraph (A), there

shall not be taken into account any significant financial

benefit merely because payments by the service recipient

under the contract or arrangement are decreased by reason of

increased production or efficiency or the recovery of energy

or other products.

(5) Exception for certain low-income housing

This subsection shall not apply to any property described in

clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)

(relating to low-income housing) if -

(A) such property is operated by or for an organization

described in paragraph (3) or (4) of section 501(c), and

(B) at least 80 percent of the units in such property are

leased to low-income tenants (within the meaning of section

167(k)(3)(B)) (as in effect on the day before the date of the

enactment of the Revenue Reconcilation (!3) Act of 1990).

(6) Regulations

The Secretary may prescribe such regulations as may be

necessary or appropriate to carry out the provisions of this

subsection.

(f) Use of related persons or pass-thru entities

The Secretary shall prescribe such regulations as may be

necessary or appropriate to prevent the avoidance of those

provisions of this title which deal with -

(1) the linking of borrowing to investment, or

(2) diminishing risks,

through the use of related persons, pass-thru entities, or other

intermediaries.

(g) Clarification of fair market value in the case of nonrecourse

indebtedness

For purposes of subtitle A, in determining the amount of gain or

loss (or deemed gain or loss) with respect to any property, the

fair market value of such property shall be treated as being not

less than the amount of any nonrecourse indebtedness to which such

property is subject.

(h) Motor vehicle operating leases

(1) In general

For purposes of this title, in the case of a qualified motor

vehicle operating agreement which contains a terminal rental

adjustment clause -

(A) such agreement shall be treated as a lease if (but for

such terminal rental adjustment clause) such agreement would be

treated as a lease under this title, and

(B) the lessee shall not be treated as the owner of the

property subject to an agreement during any period such

agreement is in effect.

(2) Qualified motor vehicle operating agreement defined

For purposes of this subsection -

(A) In general

The term "qualified motor vehicle operating agreement" means

any agreement with respect to a motor vehicle (including a

trailer) which meets the requirements of subparagraphs (B),

(C), and (D) of this paragraph.

(B) Minimum liability of lessor

An agreement meets the requirements of this subparagraph if

under such agreement the sum of -

(i) the amount the lessor is personally liable to repay,

and

(ii) the net fair market value of the lessor's interest in

any property pledged as security for property subject to the

agreement,

equals or exceeds all amounts borrowed to finance the

acquisition of property subject to the agreement. There shall

not be taken into account under clause (ii) any property

pledged which is property subject to the agreement or property

directly or indirectly financed by indebtedness secured by

property subject to the agreement.

(C) Certification by lessee; notice of tax ownership

An agreement meets the requirements of this subparagraph if

such agreement contains a separate written statement separately

signed by the lessee -

(i) under which the lessee certifies, under penalty of

perjury, that it intends that more than 50 percent of the use

of the property subject to such agreement is to be in a trade

or business of the lessee, and

(ii) which clearly and legibly states that the lessee has

been advised that it will not be treated as the owner of the

property subject to the agreement for Federal income tax

purposes.

(D) Lessor must have no knowledge that certification is false

An agreement meets the requirements of this subparagraph if

the lessor does not know that the certification described in

subparagraph (C)(i) is false.

(3) Terminal rental adjustment clause defined

(A) In general

For purposes of this subsection, the term "terminal rental

adjustment clause" means a provision of an agreement which

permits or requires the rental price to be adjusted upward or

downward by reference to the amount realized by the lessor

under the agreement upon sale or other disposition of such

property.

(B) Special rule for lessee dealers

The term "terminal rental adjustment clause" also includes a

provision of an agreement which requires a lessee who is a

dealer in motor vehicles to purchase the motor vehicle for a

predetermined price and then resell such vehicle where such

provision achieves substantially the same results as a

provision described in subparagraph (A).

(i) Taxable mortgage pools

(1) Treated as separate corporations

A taxable mortgage pool shall be treated as a separate

corporation which may not be treated as an includible corporation

with any other corporation for purposes of section 1501.

(2) Taxable mortgage pool defined

For purposes of this title -

(A) In general

Except as otherwise provided in this paragraph, a taxable

mortgage pool is any entity (other than a REMIC or a FASIT) if

-

(i) substantially all of the assets of such entity consists

of debt obligations (or interests therein) and more than 50

percent of such debt obligations (or interests) consists of

real estate mortgages (or interests therein),

(ii) such entity is the obligor under debt obligations with

2 or more maturities, and

(iii) under the terms of the debt obligations referred to

in clause (ii) (or underlying arrangement), payments on such

debt obligations bear a relationship to payments on the debt

obligations (or interests) referred to in clause (i).

(B) Portion of entities treated as pools

Any portion of an entity which meets the definition of

subparagraph (A) shall be treated as a taxable mortgage pool.

(C) Exception for domestic building and loan

Nothing in this subsection shall be construed to treat any

domestic building and loan association (or portion thereof) as

a taxable mortgage pool.

(D) Treatment of certain equity interests

To the extent provided in regulations, equity interest of

varying classes which correspond to maturity classes of debt

shall be treated as debt for purposes of this subsection.

(3) Treatment of certain REIT's

If -

(A) a real estate investment trust is a taxable mortgage

pool, or

(B) a qualified REIT subsidiary (as defined in section

856(i)(2)) of a real estate investment trust is a taxable

mortgage pool,

under regulations prescribed by the Secretary, adjustments

similar to the adjustments provided in section 860E(d) shall

apply to the shareholders of such real estate investment trust.

(j) Tax treatment of Federal Thrift Savings Fund

(1) In general

For purposes of this title -

(A) the Thrift Savings Fund shall be treated as a trust

described in section 401(a) which is exempt from taxation under

section 501(a);

(B) any contribution to, or distribution from, the Thrift

Savings Fund shall be treated in the same manner as

contributions to or distributions from such a trust; and

(C) subject to section 401(k)(4)(B) and any dollar limitation

on the application of section 402(e)(3), contributions to the

Thrift Savings Fund shall not be treated as distributed or made

available to an employee or Member nor as a contribution made

to the Fund by an employee or Member merely because the

employee or Member has, under the provisions of subchapter III

of chapter 84 of title 5, United States Code, and section 8351

of such title 5, an election whether the contribution will be

made to the Thrift Savings Fund or received by the employee or

Member in cash.

(2) Nondiscrimination requirements

Notwithstanding any other provision of law, the Thrift Savings

Fund is not subject to the nondiscrimination requirements

applicable to arrangements described in section 401(k) or to

matching contributions (as described in section 401(m)), so long

as it meets the requirements of this section.

(3) Coordination with Social Security Act

Paragraph (1) shall not be construed to provide that any amount

of the employee's or Member's basic pay which is contributed to

the Thrift Savings Fund shall not be included in the term "wages"

for the purposes of section 209 of the Social Security Act or

section 3121(a) of this title.

(4) Definitions

For purposes of this subsection, the terms "Member",

"employee", and "Thrift Savings Fund" shall have the same

respective meanings as when used in subchapter III of chapter 84

of title 5, United States Code.

(5) Coordination with other provisions of law

No provision of law not contained in this title shall apply for

purposes of determining the treatment under this title of the

Thrift Savings Fund or any contribution to, or distribution from,

such Fund.

(k) Treatment of certain amounts paid to charity

In the case of any payment which, except for section 501(b) of

the Ethics in Government Act of 1978, might be made to any officer

or employee of the Federal Government but which is made instead on

behalf of such officer or employee to an organization described in

section 170(c) -

(1) such payment shall not be treated as received by such

officer or employee for all purposes of this title and for all

purposes of any tax law of a State or political subdivision

thereof, and

(2) no deduction shall be allowed under any provision of this

title (or of any tax law of a State or political subdivision

thereof) to such officer or employee by reason of having such

payment made to such organization.

For purposes of this subsection, a Senator, a Representative in, or

a Delegate or Resident Commissioner to, the Congress shall be

treated as an officer or employee of the Federal Government.

(g742l) Regulations relating to conduit arrangements

The Secretary may prescribe regulations recharacterizing any

multiple-party financing transaction as a transaction directly

among any 2 or more of such parties where the Secretary determines

that such recharacterization is appropriate to prevent avoidance of

any tax imposed by this title.

(m) Designation of contract markets

Any designation by the Commodity Futures Trading Commission of a

contract market which could not have been made under the law in

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

Futures Modernization Act of 2000 shall apply for purposes of this

title except to the extent provided in regulations prescribed by

the Secretary.

(n) Cross references

(1) Other definitions

For other definitions, see the following sections of Title 1

of the United States Code:

(1) Singular as including plural, section 1.

(2) Plural as including singular, section 1.

(3) Masculine as including feminine, section 1.

(4) Officer, section 1.

(5) Oath as including affirmation, section 1.

(6) County as including parish, section 2.

(7) Vessel as including all means of water transportation,

section 3.

(8) Vehicle as including all means of land transportation,

section 4.

(9) Company or association as including successors and

assigns, section 5.

(2) Effect of cross references

For effect of cross references in this title, see section

7806(a).

-SOURCE-

(Aug. 16, 1954, ch. 736, 68A Stat. 911; Pub. L. 86-70, Sec. 22(g),

(h), June 25, 1959, 73 Stat. 146; Pub. L. 86-624, Sec. 18(i), (j),

July 12, 1960, 74 Stat. 416; Pub. L. 86-778, title I, Sec. 103(t),

Sept. 13, 1960, 74 Stat. 941; Pub. L. 87-834, Secs. 6(c), 7(h),

Oct. 16, 1962, 76 Stat. 982, 988; Pub. L. 87-870, Sec. 5(a), Oct.

23, 1962, 76 Stat. 1161; Pub. L. 88-272, title II, Secs. 204(a)(3),

234(b)(3), Feb. 26, 1964, 78 Stat. 36, 114; Pub. L. 89-368, title

I, Sec. 102(b)(5), Mar. 15, 1966, 80 Stat. 64; Pub. L. 89-809,

title I, Sec. 103(l)(1), Nov. 13, 1966, 80 Stat. 1554; Pub. L.

90-364, title I, Sec. 103(e)(6), June 28, 1968, 82 Stat. 264; Pub.

L. 91-172, title IV, Sec. 432(c), (d), title IX, Sec. 960(j), Dec.

30, 1969, 83 Stat. 622, 623, 735; Pub. L. 92-606, Sec. 1(f)(4),

Oct. 31, 1972, 86 Stat. 1497; Pub. L. 93-406, title III, Sec. 3043,

Sept. 2, 1974, 88 Stat. 1003; Pub. L. 94-455, title XII, Sec.

1203(a), title XIX, Sec. 1906(a)(57), (b)(13)(A), (c)(3), Oct. 4,

1976, 90 Stat. 1688, 1832, 1834, 1835; Pub. L. 95-600, title I,

Sec. 157(k)(2), title VII, Sec. 701(cc)(2), Nov. 6, 1978, 92 Stat.

2809, 2923; Pub. L. 97-34, title VII, Sec. 725(c)(4), Aug. 13,

1981, 95 Stat. 346; Pub. L. 97-248, title II, Sec. 201(d)(10),

formerly Sec. 201(c)(10), title III, Secs. 307(a)(17), 308(a),

336(a), Sept. 3, 1982, 96 Stat. 421, 590, 591, 628, renumbered Sec.

201(d)(10) and amended Pub. L. 97-448, title III, Sec.

306(a)(1)(A)(i), (b)(3), Jan. 12, 1983, 96 Stat. 2400, 2406; Pub.

L. 97-449, Sec. 5(e), Jan. 12, 1983, 96 Stat. 2442; Pub. L. 97-473,

title II, Sec. 203, Jan. 14, 1983, 96 Stat. 2611; Pub. L. 98-67,

title I, Secs. 102(a), 104(d)(1), Aug. 5, 1983, 97 Stat. 369, 379;

Pub. L. 98-216, Sec. 3(c)(2), Feb. 14, 1984, 98 Stat. 6; Pub. L.

98-369, div. A, title I, Secs. 31(e), 43(a)(1), 53(c), 75(c),

138(a), title IV, Secs. 412(b)(11), 422(d)(3), 474(r)(29)(K),

491(d)(53), title V, Sec. 526(c)(1), July 18, 1984, 98 Stat. 518,

558, 567, 595, 672, 792, 798, 845, 852, 874; Pub. L. 98-443, Sec.

9(q), Oct. 4, 1984, 98 Stat. 1708; Pub. L. 99-514, title II, Sec.

201(c), (d)(14), title VI, Secs. 671(b)(3), 673, title XI, Secs.

1137, 1147(a), 1166(a), title XVIII, Secs. 1802(a)(9)(C),

1810(l)(1)-(5)(A), 1842(d), 1899A(63), (64), Oct. 22, 1986, 100

Stat. 2138, 2142, 2317, 2319, 2486, 2493, 2511, 2790, 2830-2832,

2853, 2962; Pub. L. 100-202, Sec. 101(m) [title VI, Sec. 624(a)],

Dec. 22, 1987, 101 Stat. 1329-390, 1329-429; Pub. L. 100-647, Sec.

1(c), title I, Secs. 1001(d)(2)(D), 1002(a)(2), 1006(t)(12),

(25)(A), 1011A(m)(1), 1011B(e), 1018(g)(3), Nov. 10, 1988, 102

Stat. 3342, 3351, 3352, 3422, 3426, 3483, 3489, 3583; Pub. L.

101-194, title VI, Sec. 602, Nov. 30, 1989, 103 Stat. 1762; Pub. L.

101-508, title XI, Secs. 11704(a)(34), 11812(b)(13), Nov. 5, 1990,

104 Stat. 1388-519, 1388-536; Pub. L. 102-90, title III, Sec.

314(e), Aug. 14, 1991, 105 Stat. 470; Pub. L. 102-318, title V,

Sec. 521(b)(43), July 3, 1992, 106 Stat. 313; Pub. L. 103-66, title

XIII, Sec. 13238, Aug. 10, 1993, 107 Stat. 508; Pub. L. 103-296,

title III, Sec. 320(a)(3), Aug. 15, 1994, 108 Stat. 1535; Pub. L.

104-88, title III, Sec. 304(e), Dec. 29, 1995, 109 Stat. 944; Pub.

L. 104-188, title I, Secs. 1402(b)(3), 1621(b)(8), (9), 1907(a)(1),

(2), Aug. 20, 1996, 110 Stat. 1790, 1867, 1916; Pub. L. 105-34,

title XI, Secs. 1151(a), 1174(b), title XVI, Sec. 1601(i)(3)(A),

Aug. 5, 1997, 111 Stat. 986, 989, 1093; Pub. L. 106-554, Sec.

1(a)(7) [title IV, Sec. 401(i)], Dec. 21, 2000, 114 Stat. 2763,

2763A-650; Pub. L. 107-16, title V, Sec. 542(e)(3), June 7, 2001,

115 Stat. 85.)

-STATAMEND-

AMENDMENT OF SUBSECTION (A)

Pub. L. 107-16, title V, Sec. 542(e)(3), (f)(1), title IX, Sec.

901, June 7, 2001, 115 Stat. 85, 86, 150, provided that, applicable

to estates of decedents dying after Dec. 31, 2009, subsection (a)

of this section is temporarily amended by adding at the end the

following new paragraph:

(47) Executor

The term "executor" means the executor or administrator of the

decedent, or, if there is no executor or administrator appointed,

qualified, and acting within the United States, then any person

in actual or constructive possession of any property of the

decedent.

See Effective and Termination Dates of 2001 Amendment note below.

-REFTEXT-

REFERENCES IN TEXT

Section 401 of the National Housing Act, referred to in subsec.

(a)(19)(A), (32)(A)(i), which was classified to section 1724 of

Title 12, Banks and Banking, was repealed by Pub. L. 101-73, title

IV, Sec. 407, Aug. 9, 1989, 103 Stat. 363.

Part A and part B of title I of the Housing Act of 1949, referred

to in subsec. (a)(19)(C)(vi), which were classified generally to

part A (Sec. 1450 et seq.) and part B (Sec. 1469 et seq.) of

subchapter II of chapter 8A of Title 42, The Public Health and

Welfare, were omitted from the Code pursuant to section 5316 of

Title 42, which terminated authority to make new loans and grants

under title I of that Act after Jan. 1, 1975.

Section 103 of the Demonstration Cities and Metropolitan

Development Act of 1966, referred to in subsec. (a)(19)(C)(vi),

which was classified to section 3303 of Title 42, was omitted from

the Code pursuant to section 5316 of Title 42, which terminated

authority to make new loans and grants under title I (Sec. 101 et

seq.) of that Act after Jan. 1, 1975.

The Internal Revenue Code of 1939, referred to in subsec.

(a)(29), is act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior

to the enactment of the Internal Revenue Code of 1986 [formerly

I.R.C. 1954], the 1939 Code was classified to former Title 26,

Internal Revenue Code. The Internal Revenue Code of 1954 was

redesignated The Internal Revenue Code of 1986 by Pub. L. 99-514,

Sec. 2, Oct. 22, 1986, 100 Stat. 2095. For table of comparisons of

the 1939 Code to the 1986 Code, see Table I preceding section 1 of

this title.

The Employee Retirement Income Security Act of 1974, referred to

in subsec. (a)(35), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829,

as amended. Subtitle C of title III of the Employee Retirement

Income Security Act of 1974 is classified to subtitle C (Sec. 1241

et seq.) of subchapter II of chapter 18 of Title 29, Labor and

amended subsec. (a)(35) of this section. For complete

classification of this Act to the Code, see Short Title note set

out under section 1001 of Title 29 and Tables.

The Indian Tribal Governmental Tax Status Act of 1982, referred

to in subsec. (a)(40)(B), is title II of Pub. L. 97-473, Jan. 14,

1983, 96 Stat. 2607, as amended, which is classified principally to

subchapter C (Sec. 7871) of chapter 80 of this title. For complete

classification of this Act to the Code, see Short Title of 1983

Amendments note set out under section 1 of this title and Tables.

Section 101(15) of the Immigration and Nationality Act, referred

to in subsec. (b)(5)(C)(i), (D)(i), probably means section

101(a)(15) of that Act, which is classified to section 1101(a)(15)

of Title 8, Aliens and Nationality.

Section 212(2) of the Federal Water Pollution Control Act,

referred to in subsec. (e)(3)(E), is classified to section 1292(2)

of Title 33, Navigation and Navigable Waters.

The date of the enactment of the Revenue Reconciliation Act of

1990, referred to in subsec. (e)(5)(B), is the date of enactment of

Pub. L. 101-508, which was approved Nov. 5, 1990.

Section 209 of the Social Security Act, referred to in subsec.

(j)(3), is classified to section 409 of Title 42, The Public Health

and Welfare.

Section 501(b) of the Ethics in Government Act of 1978, referred

to in subsec. (k), is section 501(b) of Pub. L. 95-521, which is

set out in the Appendix to Title 5, Government Organization and

Employees.

The date of the enactment of the Commodity Futures Modernization

Act of 2000, referred to in subsec. (m), is the date of enactment

of Pub. L. 106-554, which was approved Dec. 21, 2000.

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AMENDMENTS

2000 - Subsecs. (m), (n). Pub. L. 106-554 added subsec. (m) and

redesignated former subsec. (m) as (n).

1997 - Subsec. (a)(4). Pub. L. 105-34, Sec. 1151(a), inserted

before period at end "unless, in the case of a partnership, the

Secretary provides otherwise by regulations".

Subsec. (a)(30)(E)(ii). Pub. L. 105-34, Sec. 1601(i)(3)(A),

substituted "persons" for "fiduciaries".

Subsec. (b)(7)(A). Pub. L. 105-34, Sec. 1174(b)(2), substituted

", (C), or (D)" for "or (C)".

Subsec. (b)(7)(D). Pub. L. 105-34, Sec. 1174(b)(1), added subpar.

(D).

1996 - Subsec. (a)(19)(C)(xi). Pub. L. 104-188, Sec. 1621(b)(8),

amended cl. (xi) generally. Prior to amendment, cl. (xi) read as

follows: "any regular or residual interest in a REMIC, but only in

the proportion which the assets of such REMIC consist of property

described in any of the preceding clauses of this subparagraph;

except that if 95 percent or more of the assets of such REMIC are

assets described in clauses (i) through (x), the entire interest in

the REMIC shall qualify."

Subsec. (a)(20). Pub. L. 104-188, Sec. 1402(b)(3), struck out ",

for the purpose of applying the provisions of section 101(b) with

respect to employees' death benefits" after "health plans".

Subsec. (a)(30)(C) to (E). Pub. L. 104-188, Sec. 1907(a)(1),

struck out "and" at end of subpar. (C), added subpars. (D) and (E),

and struck out former subpar. (D) which read as follows: "any

estate or trust (other than a foreign estate or foreign trust,

within the meaning of section 7701(a)(31))."

Subsec. (a)(31). Pub. L. 104-188, Sec. 1907(a)(2), reenacted

heading without change and amended text generally. Prior to

amendment, text read as follows: "The terms 'foreign estate' and

'foreign trust' mean an estate or trust, as the case may be, the

income of which, from sources without the United States which is

not effectively connected with the conduct of a trade or business

within the United States, is not includible in gross income under

subtitle A."

Subsec. (i)(2)(A). Pub. L. 104-188, Sec. 1621(b)(9), inserted "or

a FASIT" after "a REMIC" in introductory provisions.

1995 - Subsec. (a)(33)(B). Pub. L. 104-88, Sec. 304(e)(1),

substituted "Federal Energy Regulatory Commission" for "Federal

Power Commission".

Subsec. (a)(33)(C)(i). Pub. L. 104-88, Sec. 304(e)(2),

substituted "Surface Transportation Board" for "Interstate Commerce

Commission".

Subsec. (a)(33)(C)(ii). Pub. L. 104-88, Sec. 304(e)(3),

substituted "Federal Energy Regulatory Commission" for "Interstate

Commerce Commission".

Subsec. (a)(33)(F). Pub. L. 104-88, Sec. 304(e)(4), substituted

"a water carrier subject to jurisdiction under subchapter II of

chapter 135 of title 49" for "common carrier by water, subject to

the jurisdiction of the Interstate Commerce Commission under

subchapter III of chapter 105 of title 49, or subject to the

jurisdiction of the Federal Maritime Board under the Intercoastal

Shipping Act, 1933".

Subsec. (a)(33)(G). Pub. L. 104-88, Sec. 304(e)(5), substituted

"rail carrier subject to part A of subtitle IV" for "railroad

corporation subject to subchapter I of chapter 105".

Subsec. (a)(33)(H). Pub. L. 104-88, Sec. 304(e)(6), substituted

"part A of subtitle IV" for "subchapter I of chapter 105".

1994 - Subsec. (b)(5)(C)(i), (D)(i)(II). Pub. L. 103-296

substituted "(J) or (Q)" for "(J)".

1993 - Subsecs. (l), (m). Pub. L. 103-66 added subsec. (l) and

redesignated former subsec. (l) as (m).

1992 - Subsec. (j)(1)(C). Pub. L. 102-318 substituted "402(e)(3)"

for "402(a)(8)".

1991 - Subsec. (k). Pub. L. 102-90 amended last sentence

generally. Prior to amendment, last sentence read as follows: "For

purposes of this subsection, a Representative in, or a Delegate or

Resident Commissioner to, the Congress shall be treated as an

officer or employee of the Federal Government and a Senator or

officer (except the Vice President) or employee of the Senate shall

not be treated as an officer or employee of the Federal

Government."

1990 - Subsec. (e)(5)(B). Pub. L. 101-508, Sec. 11812(b)(13),

inserted before period at end "(as in effect on the day before the

date of the enactment of the Revenue Reconcilation [sic] Act of

1990)".

Subsec. (j)(1)(C). Pub. L. 101-508, Sec. 11704(a)(34),

substituted "(C) subject to section 401(k)(4)(B) and any dollar

limitation on the application of section 402(a)(8)," for "(C)

subject to, section 401(k)(4)(B), and any dollar limitation on the

application of section 402(a)(8),".

1989 - Subsecs. (k), (l). Pub. L. 101-194 added subsec. (k) and

redesignated former subsec. (k) as (l).

1988 - Subsec. (a)(19). Pub. L. 100-647, Sec. 1006(t)(25)(A),

inserted at end "For purposes of determining whether any interest

in a REMIC qualifies under clause (xi), any regular interest in

another REMIC held by such REMIC shall be treated as a loan

described in a preceding clause under principles similar to the

principles of clause (xi); except that, if such REMIC's are part of

a tiered structure, they shall be treated as 1 REMIC for purposes

of clause (xi)."

Subsec. (a)(19)(C)(xi). Pub. L. 100-647, Sec. 1006(t)(12),

substituted "are assets described" for "are loans described".

Subsec. (a)(20). Pub. L. 100-647, Sec. 1011B(e), substituted "and

106" for "106, and 125" and inserted "and for purposes of applying

section 125 with respect to cafeteria plans," before "the term".

Subsec. (a)(29). Pub. L. 100-647, Sec. 1(c), substituted

"Internal Revenue Code of 1986" for "Internal Revenue Code of

1954".

Subsec. (b)(5)(A)(iv). Pub. L. 100-647, Sec. 1018(g)(3),

substituted "section 274(l)(1)(B)" for "section 274(k)(2)".

Subsec. (b)(5)(D)(i)(I). Pub. L. 100-647, Sec. 1001(d)(2)(D),

substituted "subparagraph (F) or (M)" for "subparagraph (F)".

Subsec. (e)(5). Pub. L. 100-647, Sec. 1002(a)(2), made technical

correction to language of Pub. L. 99-514, Sec. 201(d)(14)(B), see

1986 Amendment note below.

Subsec. (j)(1)(C). Pub. L. 100-647, Sec. 1011A(m)(1), inserted ",

section 401(k)(4)(B)," after "the provisions of paragraph (2)" in

subpar. (C), as it read before amendment by Pub. L. 100-202. See

Effective Date of 1988 Amendment note below.

1987 - Subsec. (j)(1)(C). Pub. L. 100-202, Sec. 101(m) [title VI,

Sec. 624(a)(1)], which directed that "the provisions of paragraph

(2) and" after "subject to" be struck out, was executed by striking

out "the provisions of paragraph (2)" after "subject to" in view of

the amendment by section 1011A(m)(1) of Pub. L. 100-647 which was

effective as if it had been included in Pub. L. 99-514. See 1988

Amendment note above.

Subsec. (j)(2). Pub. L. 100-202, Sec. 101(m) [title VI, Sec.

624(a)(2)], added par. (2) and struck out former par. (2) which

read as follows: "Paragraph (1)(C) shall not apply to the Thrift

Savings Fund unless the Fund meets the antidiscrimination

requirements (other than any requirement relating to coverage)

applicable to arrangements described in section 401(k) and to

matching contributions. Rules similar to the rules of sections

401(k)(8) and 401(m)(8) (relating to no disqualification if excess

contributions distributed) shall apply for purposes of the

preceding sentence."

1986 - Subsec. (a)(17). Pub. L. 99-514, Sec. 1842(d), inserted

reference to section 2516.

Subsec. (a)(19)(C)(xi). Pub. L. 99-514, Sec. 671(b)(3), added cl.

(xi).

Subsec. (a)(20). Pub. L. 99-514, Sec. 1166(a), inserted reference

to section 125.

Subsec. (a)(46). Pub. L. 99-514, Sec. 1137, inserted last

sentence.

Subsec. (b)(1)(A). Pub. L. 99-514, Sec. 1810(l)(2), substituted

"the requirements of clause (i), (ii), or (iii)" for "the

requirements of clause (i) or (ii)" in introductory provisions and

added cl. (iii).

Subsec. (b)(2)(A)(iv). Pub. L. 99-514, Sec. 1810(l)(3), added cl.

(iv).

Subsec. (b)(4). Pub. L. 99-514, Sec. 1810(l)(4), added par. (4).

Former par. (4) redesignated (5).

Subsec. (b)(5). Pub. L. 99-514, Sec. 1810(l)(4), redesignated

par. (4) as (5). Former par. (5) redesignated (6).

Subsec. (b)(5)(A)(iv). Pub. L. 99-514, Sec. 1810(l)(5)(A), which

directed that cl. (iv) be added to subpar. (4)(A), was executed by

adding cl. (iv) to subpar. (5)(A) to reflect the probable intent of

Congress and the intervening redesignation of par. (4) as (5) by

section 1810(l)(4) of Pub. L. 99-514.

Subsec. (b)(5)(E)(i). Pub. L. 99-514, Sec. 1810(l)(1), inserted

last sentence.

Pub. L. 99-514, Sec. 1899A(63), substituted "preceding" for

"preceeding".

Subsec. (b)(6) to (11). Pub. L. 99-514, Sec. 1810(l)(4),

redesignated pars. (5) to (10) as pars. (6) to (11), respectively.

Subsec. (e)(4)(A). Pub. L. 99-514, Sec. 201(d)(14)(A),

substituted "section 168(h)" for "section 168(j)".

Pub. L. 99-514, Sec. 1802(a)(9)(C), inserted at end "For purposes

of this paragraph, the term 'related entity' has the same meaning

as when used in section 168(j)."

Subsec. (e)(5). Pub. L. 99-514, Sec. 201(d)(14)(B), as amended by

Pub. L. 100-647, Sec. 1002(a)(2), substituted "property described

in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B)

(relating to low-income housing)" for "low-income housing (within

the meaning of section 168(c)(2)(F))".

Pub. L. 99-514, Sec. 1899A(64), substituted "section

168(c)(2)(F))" for "section 168(C)(2)(F))".

Subsec. (h). Pub. L. 99-514, Sec. 201(c), added subsec. (h).

Former subsec. (h), relating to cross references, was successively

redesignated as (i), (j), and (k).

Subsec. (i). Pub. L. 99-514, Sec. 673, added subsec. (i). Former

subsec. (i), relating to cross references, as previously

redesignated, was successively redesignated as (j) and (k).

Subsec. (j). Pub. L. 99-514, Sec. 1147(a), added subsec. (j).

Former subsec. (j), relating to cross references, as previously

redesignated, was redesignated as (k).

Subsec. (k). Pub. L. 99-514, Secs. 201(c), 673, 1147(a),

successively redesignated subsec. (h), relating to cross

references, as subsecs. (i), (j), and (k).

1984 - Subsec. (a)(16). Pub. L. 98-369, Sec. 474(r)(29)(K),

struck out "1451," after "1443".

Subsec. (a)(17). Pub. L. 98-369, Sec. 422(d)(3), struck out

reference to sections 71 and 215.

Subsec. (a)(33)(E). Pub. L. 98-443 substituted "Secretary of

Transportation" for "Civil Aeronautics Board".

Subsec. (a)(33)(G). Pub. L. 98-216 substituted "subchapter I of

chapter 105 of title 49" for "part I of the Interstate Commerce

Act".

Subsec. (a)(34). Pub. L. 98-369, Sec. 412(b)(11), repealed par.

(34) which defined estimated income tax in the case of an

individual or a corporation as the estimated tax defined in section

6015(d) or 6154(c), respectively.

Subsec. (a)(37)(C). Pub. L. 98-369, Sec. 491(d)(53), struck out

subpar. (C) which included a retirement bond described in section

409 within the term "individual plan".

Subsec. (a)(42) to (45). Pub. L. 98-369, Sec. 43(a)(1), added

pars. (42) to (45).

Subsec. (a)(46). Pub. L. 98-369, Sec. 526(c)(1), added par. (46).

Subsec. (b). Pub. L. 98-369, Sec. 138(a), added subsec. (b).

Former subsec. (b), relating to includes and including,

redesignated (c).

Subsec. (c). Pub. L. 98-369, Sec. 138(a), redesignated former

subsec. (b), relating to includes and including, as (c). Former

subsec. (c), relating to Commonwealth of Puerto Rico, redesignated

(d).

Subsec. (d). Pub. L. 98-369, Sec. 138(a), redesignated former

subsec. (c), relating to Commonwealth of Puerto Rico, as (d).

Former subsec. (d), relating to cross references, redesignated (e).

Subsec. (e). Pub. L. 98-369, Sec. 31(e), added subsec. (e).

Former subsec. (e), relating to cross references, redesignated (f).

Pub. L. 98-369, Sec. 138(a), redesignated former subsec. (d),

relating to cross references, as (e).

Subsec. (f). Pub. L. 98-369, Sec. 53(c), added subsec. (f).

Former subsec. (f), relating to cross references, redesignated (g).

Pub. L. 98-369, Sec. 31(e), redesignated former subsec. (e),

relating to cross references, as (f).

Subsec. (g). Pub. L. 98-369, Sec. 75(c), added subsec. (g).

Former subsec. (g), relating to cross references, redesignated (h).

Pub. L. 98-369, Sec. 53(c), redesignated former subsec. (f),

relating to cross references, as (g).

Subsec. (h). Pub. L. 98-369, Sec. 75(c), redesignated former

subsec. (g), relating to cross references, as (h).

1983 - Subsec. (a)(16). Pub. L. 98-67, Sec. 102(a), repealed

amendments made by Pub. L. 97-248. See 1982 Amendment note below.

Subsec. (a)(33)(F). Pub. L. 97-449, Sec. 5(e)(1), substituted

"subchapter III of chapter 105 of title 49" for "part III of the

Interstate Commerce Act".

Subsec. (a)(33)(H). Pub. L. 97-449, Sec. 5(e)(2), substituted

"subchapter I of chapter 105 of title 49" for "part I of the

Interstate Commerce Act".

Subsec. (a)(38), (39). Pub. L. 97-448, Sec. 306(b)(3),

redesignated par. (38), as added by Pub. L. 97-248, Sec. 336(a),

relating to persons residing outside the United States, as (39).

Subsec. (a)(40). Pub. L. 97-473 added par. (40).

Subsec. (a)(41). Pub. L. 98-67, Sec. 104(d)(1), added par. (41).

1982 - Subsec. (a)(16). Pub. L. 97-248, Secs. 307(a)(17), 308(a),

provided that, applicable to payments of interest, dividends, and

patronage dividends paid or credited after June 30, 1983, par. (16)

is amended by substituting "1461 or 3451" for "or 1461". Section

102(a), (b) of Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369,

repealed subtitle A (Secs. 301-308) of title III of Pub. L. 97-248

as of the close of June 30, 1983, and provided that the Internal

Revenue Code of 1954 [now 1986] [this title] shall be applied and

administered (subject to certain exceptions) as if such subtitle A

(and the amendments made by such subtitle A) had not been enacted.

Subsec. (a)(38). Pub. L. 97-248, Sec. 201(d)(10), formerly Sec.

201(c)(10), added par. (38) relating to joint return.

Pub. L. 97-248, Sec. 336(a), added par. (38) relating to persons

residing outside the United States.

1981 - Subsec. (a)(34)(A). Pub. L. 97-34 substituted "section

6015(d)" for "section 6015(c)".

1978 - Subsec. (a)(36)(B)(iii). Pub. L. 95-600, Sec. 701(cc)(2),

substituted "prepares as a fiduciary a return or claim for refund

for any person, or" for "prepares a return or claim for refund for

any trust or estate with respect to which he is a fiduciary, or".

Subsec. (a)(37). Pub. L. 95-600, Sec. 157(k)(2), added par. (37).

1976 - Subsec. (a)(4). Pub. L. 94-455, Sec. 1906(c)(3), struck

out "or Territory" after "any State".

Subsec. (a)(11). Pub. L. 94-455, Sec. 1906(a)(57)(A), substituted

definitions of "Secretary of the Treasury" and "Secretary" for

"Secretary. - The term 'Secretary' means the Secretary of the

Treasury".

Subsec. (a)(12)(A). Pub. L. 94-455, Sec. 1906(a)(57)(B),

substituted definition of "or his delegate" for definition of

"Secretary of his delegate".

Subsec. (a)(19), (23), (33). Pub. L. 94-455, Sec. 1906(b)(13)(A),

struck out "or his delegate" after "Secretary" wherever appearing.

Subsec. (a)(36). Pub. L. 94-455, Sec. 1203(a), added par. (36).

1974 - Subsec. (a)(35). Pub. L. 93-406 added par. (35).

1972 - Subsec. (a)(12)(B). Pub. L. 92-606 inserted reference to

chapter 1.

1969 - Subsec. (a)(19)(A). Pub. L. 91-172, Sec. 432(c) reenacted

subpar. (A) without change.

Subsec. (a)(19)(B). Pub. L. 91-172, Sec. 432(c), struck out

reference to subpar. (C).

Subsec. (a)(19)(C). Pub. L. 91-172, Sec. 432(c), substituted 60

percent for 90 percent in text preceding cl. (i), reenacted cl. (i)

without change, in cl. (ii), excluded obligations the interest on

which was excludible from gross income under section 103, expanded

provisions of former cl. (iii) and transferred them to cl. (v),

reenacted cl. (iv) without change, redesignated former cls. (v) and

(vi) as cls. (viii) and (x) and added cls. (iii), (vi), (vii) and

(ix), and text following cl. (x).

Subsec. (a)(19)(D) to (F). Pub. L. 91-172, Sec. 432(c), struck

out subpars. (D) to (F) and text following subpar. (F) which had

further qualified the assets.

Subsec. (a)(27). Pub. L. 91-172, Sec. 960(j), substituted "United

States Tax Court" for "Tax Court of the United States".

Subsec. (a)(32). Pub. L. 91-172, Sec. 432(d), struck out

references to subpars. (D), (E) and (F) and struck out "determined

with the application of the second, third, and fourth sentences of

paragraph (19)." in subpar. (B) and, in text following subpar. (B),

struck out provisions relating to the deduction allowable for a

reasonable addition to the reserve for bad debts.

1968 - Subsec. (a)(34)(B). Pub. L. 90-364 substituted "section

6154(c)" for "section 6016(b)".

1966 - Subsec. (a)(31). Pub. L. 89-809 substituted ", from

sources without the United States which is not effectively

connected with the conduct of a trade or business within the United

States," for "from sources without the United States".

Pub. L. 89-368 added par. (34).

1964 - Subsec. (a)(20). Pub. L. 88-272 inserted "For the purpose

of applying the provisions of section 79 with respect to group-term

life insurance purchased for employees".

Subsec. (a)(33). Pub. L. 88-272 added par. (33).

1962 - Subsec. (a)(19). Pub. L. 87-834, Sec. 6(c), amended par.

(19) generally. Prior to such amendment, subsection read as

follows: "The term 'domestic building and loan association' means a

domestic building and loan association, a domestic savings and loan

association, and a Federal savings and loan association,

substantially all the business of which is confined to making loans

to members."

Subsec. (a)(30), (31). Pub. L. 87-834, Sec. 7(h), added pars.

(30), (31).

Subsec. (a)(32). Pub. L. 87-870 added par. (32).

1960 - Subsec. (a)(9), (10). Pub. L. 86-624, Sec. 18(i), (j),

struck out reference to the Territory of Hawaii.

Subsec. (a)(12). Pub. L. 86-778 designated existing provisions as

par. (A) and added par. (B).

1959 - Subsec. (a)(9). Pub. L. 86-70, Sec. 22(g), substituted

"the Territory of Hawaii" for "the Territories of Alaska and

Hawaii".

Subsec. (a)(10). Pub. L. 86-70, Sec. 22(h), substituted

"Territory of Hawaii" for "Territories".

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT

Amendment by Pub. L. 107-16 applicable to estates of decedents

dying after Dec. 31, 2009, see section 542(f)(1) of Pub. L. 107-16,

set out as a note under section 121 of this title.

Amendment by Pub. L. 107-16 inapplicable to estates of decedents

dying, gifts made, or generation skipping transfers, after Dec. 31,

2010, and the Internal Revenue Code of 1986 to be applied and

administered to such estates, gifts, and transfers 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 1151(b) of Pub. L. 105-34 provided that: "Any regulations

issued with respect to the amendment made by subsection (a)

[amending this section] shall apply to partnerships created or

organized after the date determined under section 7805(b) of the

Internal Revenue Code of 1986 (without regard to paragraph (2)

thereof) with respect to such regulations."

Section 1174(c) of Pub. L. 105-34 provided that:

"(1) In general. - The amendments made by this section [amending

this section and sections 861 and 863 of this title] shall apply to

remuneration for services performed in taxable years beginning

after December 31, 1997.

"(2) Presence. - The amendment made by subsection (b) [amending

this section] shall apply to taxable years beginning after December

31, 1997."

Amendment by section 1601(i)(3)(A) of Pub. L. 105-34 effective as

if included in the provisions of the Small Business Job Protection

Act of 1996, Pub. L. 104-188, to which it relates, see section

1601(j) of Pub. L. 105-34, set out as a note under section 23 of

this title.

EFFECTIVE DATE OF 1996 AMENDMENTS

Section 1601(i)(4) of Pub. L. 105-34 provided that: "The

Secretary of the Treasury may by regulations or other

administrative guidance provide that the amendments made by section

1907(a) of the Small Business Job Protection Act of 1996 [Pub. L.

104-188, amending this section] shall not apply to a trust with

respect to a reasonable period beginning on the date of the

enactment of such Act [Aug. 20, 1996], if -

"(A) such trust is in existence on August 20, 1996, and is a

United States person for purposes of the Internal Revenue Code of

1986 on such date (determined without regard to such amendments),

"(B) no election is in effect under section 1907(a)(3)(B) of

such Act [set out as a note below] with respect to such trust,

"(C) before the expiration of such reasonable period, such

trust makes the modifications necessary to be treated as a United

States person for purposes of such Code (determined with regard

to such amendments), and

"(D) such trust meets such other conditions as the Secretary

may require."

Amendment by section 1402(b)(3) of Pub. L. 104-188 applicable

with respect to decedents dying after Aug. 20, 1996, see section

1402(c) of Pub. L. 104-188, set out as a note under section 101 of

this title.

Amendment by section 1621(b)(8), (9) of Pub. L. 104-188 effective

Sept. 1, 1997, see section 1621(d) of Pub. L. 104-188, set out as a

note under section 26 of this title.

Section 1907(a)(3) of Pub. L. 104-188, as amended by Pub. L.

105-34, title XI, Sec. 1161(a), Aug. 5, 1997, 111 Stat. 987,

provided that: "The amendments made by this subsection [amending

this section] shall apply -

"(A) to taxable years beginning after December 31, 1996, or

"(B) at the election of the trustee of a trust, to taxable

years ending after the date of the enactment of this Act [Aug.

20, 1996].

Such an election, once made, shall be irrevocable. To the extent

prescribed in regulations by the Secretary of the Treasury or his

delegate, a trust which was in existence on August 20, 1996 (other

than a trust treated as owned by the grantor under subpart E of

part I of subchapter J of chapter 1 of the Internal Revenue Code of

1986), and which was treated as a United States person on the day

before the date of the enactment of this Act may elect to continue

to be treated as a United States person notwithstanding section

7701(a)(30)(E) of such Code."

[Section 1161(b) of Pub. L. 105-34 provided that: "The amendment

made by subsection (a) [amending section 1907(a)(3) of Pub. L.

104-188, set out above] shall take effect as if included in the

amendments made by section 1907(a) of the Small Business Job

Protection Act of 1996 [Pub. L. 104-188]."]

EFFECTIVE DATE OF 1995 AMENDMENT

Amendment by Pub. L. 104-88 effective Jan. 1, 1996, see section 2

of Pub. L. 104-88, set out as an Effective Date note under section

701 of Title 49, Transportation.

EFFECTIVE DATE OF 1994 AMENDMENT

Amendment by Pub. L. 103-296 effective with calendar quarter

following Aug. 15, 1994, see section 320(c) of Pub. L. 103-296, set

out as a note under section 871 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 1991 AMENDMENT

Amendment by Pub. L. 102-90 effective Jan. 1, 1992, see section

314(g)(1) of Pub. L. 102-90, as amended, set out as a note under

section 31-2 of Title 2, The Congress.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by section 11812(b)(13) of Pub. L. 101-508 applicable

to property placed in service after Nov. 5, 1990, but not

applicable to any property to which section 168 of this title does

not apply by reason of subsec. (f)(5) of section 168, and not

applicable to rehabilitation expenditures described in section

252(f)(5) of Pub. L. 99-514, see section 11812(c) of Pub. L.

101-508, set out as a note under section 42 of this title.

EFFECTIVE DATE OF 1989 AMENDMENT

Section 603 of title VI of Pub. L. 101-194 provided that: "The

amendments made by this title [amending this section, sections 31-1

and 441i of Title 2, The Congress, and title V of the Ethics in

Government Act of 1978, Pub. L. 95-521, set out in the Appendix to

Title 5, Government Organization and Employees] shall take effect

on January 1, 1991. Such amendments shall cease to be effective if

the provisions of section 703 [5 U.S.C. 5318 note] are subsequently

repealed, in which case the laws in effect before such amendments

shall be deemed to be reenacted."

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by title I 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.

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 201(c), (d)(14) of Pub. L. 99-514 applicable

to property placed in service after Dec. 31, 1986, in taxable years

ending after such date, with exceptions, see sections 203 and 204

of Pub. L. 99-514, set out as a note under section 168 of this

title.

Amendment by section 201(c), (d)(14) of Pub. L. 99-514 not

applicable to any property placed in service before Jan. 1, 1994,

if such property placed in service as part of specified

rehabilitations, and not applicable to certain additional

rehabilitations, see section 251(d)(2), (3) of Pub. L. 99-514, set

out as a note under section 46 of this title.

Amendment by section 671(b)(3) of Pub. L. 99-514 applicable to

taxable years beginning after Dec. 31, 1986, see section 675 of

Pub. L. 99-514, set out as an Effective Date note under section

860A of this title.

Amendment by section 673 of Pub. L. 99-514 effective Jan. 1,

1992, but not applicable to any entity in existence on Dec. 31,

1991, except with respect to any entity as of the first day after

Dec. 31, 1991, on which there is a substantial transfer of cash or

other property to such entity, and for purposes of applying section

860F(d) of this title, applicable to taxable years beginning after

Dec. 31, 1986, see section 675(c) of Pub. L. 99-514, set out as an

Effective Date note under section 860A of this title.

Section 1166(b) of Pub. L. 99-514 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to years

beginning after December 31, 1985."

Amendment by sections 1802(a)(9)(C), 1810(l)(1)-(4), 1842(d) 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.

Section 1810(l)(5)(B) of Pub. L. 99-514 provided that: "The

amendments made by this paragraph [amending this section] shall

apply to periods after the date of the enactment of this Act [Oct.

22, 1986]."

EFFECTIVE DATE OF 1984 AMENDMENTS

Amendment by Pub. L. 98-443 effective Jan. 1, 1985, see section

9(v) of Pub. L. 98-443, set out as a note under section 5314 of

Title 5, Government Organization and Employees.

Amendment by section 31(e) of Pub. L. 98-369 effective, except as

otherwise provided in section 31(g) of Pub. L. 98-369, as to

property placed in service by the taxpayer after May 23, 1983, in

taxable years ending after such date and to property placed in

service by the taxpayer on or before May 23, 1983, if the lease to

the tax-exempt entity is entered into after May 23, 1983, except

that in the case of a service contract or other arrangement

described in section 7701(e) of this title with respect to which no

party is a tax-exempt entity, section 7701(e) shall not apply to

(A) such contract or other arrangement if such contract or other

arrangement was entered into before Nov. 5, 1983, or (B) any

renewal or other extension of such contract or other arrangement

pursuant to an option contained in such contract or other

arrangement on Nov. 5, 1983, see section 31(g)(1), (13) of Pub. L.

98-369, set out as a note under section 168 of this title.

Amendment by section 43(a)(1) of Pub. L. 98-369 applicable to

taxable years ending after July 18, 1984, see section 44 of Pub. L.

98-369, set out as an Effective Date note under section 1271 of

this title.

Amendment by section 53(c) of Pub. L. 98-369 effective July 18,

1984, except as otherwise provided, see section 53(e)(3) of Pub. L.

98-369, as amended, set out as an Effective Date note under section

1059 of this title.

Amendment by section 75(c) of Pub. L. 98-369 applicable to

distributions, sales, and exchanges made after Mar. 31, 1984, in

taxable years ending after such date, see section 75(e) of Pub. L.

98-369, set out as an Effective Date note under section 386 of this

title.

Section 138(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,

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

"(1) In general. - The amendment made by subsection (a) [amending

this section] shall apply to taxable years beginning after December

31, 1984.

"(2) Transitional rule for applying substantial presence test. -

"(A) If an alien individual was not a resident of the United

States as of the close of calendar year 1984, the determination

of whether such individual meets the substantial presence test of

section 7701(b)(3) of the Internal Revenue Code of 1986 [formerly

I.R.C. 1954] (as added by this section) shall be made by only

taking into account presence after 1984.

"(B) If an alien individual was a resident of the United States

as of the close of calendar year 1984, but was not a resident of

the United States as of the close of calendar year 1983, the

determination of whether such individual meets such substantial

presence test shall be made by only taking into account presence

in the United States after 1983.

"(3) Transitional rule for applying lawful residence test. - In

the case of any individual who -

"(A) was a lawful permanent resident of the United States

(within the meaning of section 7701(b)(5) of the Internal Revenue

Code of 1986, as added by this section) throughout calendar year

1984, or

"(B) was present in the United States at any time during 1984

while such individual was a lawful permanent resident of the

United States (within the meaning of such section 7701(b)(5)),

for purposes of section 7701(b)(2)(A) of such Code (as so added),

such individual shall be treated as a resident of the United States

during 1984."

Amendment by section 412(b)(11) of Pub. L. 98-369 applicable with

respect to taxable years beginning after Dec. 31, 1984, see section

414(a)(1) of Pub. L. 98-369, set out as a note under section 6654

of this title.

Amendment by section 422(d)(3) of Pub. L. 98-369 applicable with

respect to divorce or separation instruments executed after Dec.

31, 1984, or executed before Jan. 1, 1985, but modified on or after

Jan. 1, 1985, with express provision for application of amendment

to modification, see section 422(e)(1), (2) of Pub. L. 98-369, set

out as a note under section 71 of this title.

Amendment by section 474(r)(29)(K) of Pub. L. 98-369 not

applicable with respect to obligations issued before Jan. 1, 1984,

see section 475(b) of Pub. L. 98-369, set out as a note under

section 33 of this title.

Amendment by section 491(d)(53) 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.

Section 526(c)(2) of Pub. L. 98-369 provided that: "The amendment

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

on April 1, 1984."

EFFECTIVE DATE OF 1983 AMENDMENTS

Amendment by section 104(d)(1) of Pub. L. 98-67 applicable with

respect to payments made after Dec. 31, 1983, see section 110(a) of

Pub. L. 98-67, set out as a note under section 31 of this title.

For effective date of amendment by Pub. L. 97-473, see section

204 of Pub. L. 97-473, set out as an Effective Date note under

section 7871 of this title.

Amendment by Pub. L. 97-448 effective as if included in the

provisions of the Tax Equity and Fiscal Responsibility Act of 1982,

Pub. L. 97-248, to which such amendment relates, see section 311(d)

of Pub. L. 97-448, set out as a note under section 31 of this

title.

EFFECTIVE DATE OF 1982 AMENDMENT

Amendment by section 201(d)(10) of Pub. L. 97-248 applicable to

taxable years beginning after Dec. 31, 1982, see section 201(e)(1)

of Pub. L. 97-248, set out as a note under section 5 of this title.

Section 336(b) of Pub. L. 97-248 provided that: "The amendment

made by subsection (a) [amending this section] shall take effect on

the day after the date of the enactment of this Act [Sept. 3,

1982]."

EFFECTIVE DATE OF 1981 AMENDMENT

Amendment by Pub. L. 97-34 applicable to estimated tax for

taxable years beginning after Dec. 31, 1980, see section 725(d) of

Pub. L. 97-34, set out as a note under section 871 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by section 157(k)(2) of Pub. L. 95-600 applicable to

taxable years beginning after Dec. 31, 1974, see section 157(k)(3)

of Pub. L. 95-600, set out as a note under section 6058 of this

title.

Amendment by section 701(cc)(2) of Pub. L. 95-600 applicable to

documents prepared after Dec. 31, 1976, see section 701(cc)(3) of

Pub. L. 95-600, set out as a note under section 6695 of this title.

EFFECTIVE DATE OF 1976 AMENDMENT

Section 1203(j) of Pub. L. 94-455 provided that: "The amendments

made by this section [enacting sections 6060, 6107, 6694, 6695,

6696, 7407, and 7427 of this title, renumbering former sections

7407 and 7427 as 7408 and 7428 of this title, respectively, and

amending this section and sections 6109, 6503, 6504, and 6511 of

this title] shall apply to documents prepared after December 31,

1976."

Amendment by section 1906(a)(57), (b)(13)(A), (c)(3) of Pub. L.

94-455 effective on first day of first month which begins more than

ninety days after Oct. 4, 1976, see section 1906(d)(1) of Pub. L.

94-455, set out as a note under section 6013 of this title.

EFFECTIVE DATE OF 1972 AMENDMENT

Amendment by Pub. L. 92-606 applicable with respect to taxable

years beginning after Dec. 31, 1972, see section 2 of Pub. L.

92-606, set out in part as an Effective Date note under section 931

of this title.

EFFECTIVE DATE OF 1969 AMENDMENT

Amendment by section 432(c), (d) of Pub. L. 91-172 effective for

taxable years beginning after July 11, 1969, see section 432(e) of

Pub. L. 91-172, set out as a note under section 593 of this title.

Amendment by section 960(j) of Pub. L. 91-172 effective Dec. 30,

1969, see section 962(a) of Pub. L. 91-172, set out as a note under

section 7441 of this title.

EFFECTIVE DATE OF 1968 AMENDMENT

Amendment by Pub. L. 90-364 applicable with respect to taxable

years beginning after Dec. 31, 1967, except as provided by section

104 of Pub. L. 90-364, see section 103(f) of Pub. L. 90-364, set

out as a note under section 243 of this title.

EFFECTIVE DATE OF 1966 AMENDMENTS

Amendment by Pub. L. 89-809 applicable with respect to taxable

years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub.

L. 89-809, set out as a note under section 871 of this title.

Amendment by Pub. L. 89-368 applicable with respect to taxable

years beginning after Dec. 31, 1966, see section 102(d) of Pub. L.

89-368, set out as a note under section 6654 of this title.

EFFECTIVE DATE OF 1964 AMENDMENT

Amendment by section 204(a)(3) of Pub. L. 88-272 applicable to

group-term life insurance provided after Dec. 31, 1963, in taxable

years ending after such date, see section 204(d) of Pub. L. 88-272,

set out as an Effective Date note under section 79 of this title.

Amendment by section 234(b)(3) of Pub. L. 88-272 applicable to

taxable years beginning after Dec. 31, 1963, see section 234(c) of

Pub. L. 88-272, set out as a note under section 1503 of this title.

EFFECTIVE DATE OF 1962 AMENDMENTS

Section 5(b) of Pub. L. 87-870 provided that: "The amendment made

by subsection (a) of this section [amending this section] shall

apply with respect to taxable years beginning after the date of the

enactment of the Revenue Act of 1962 [Oct. 16, 1962]."

Section 6(g)(3) of Pub. L. 87-834 provided that: "The amendment

made by subsection (c) [amending this section] shall apply to

taxable years beginning after the date of the enactment of this Act

[Oct. 16, 1962]."

EFFECTIVE DATE OF 1960 AMENDMENTS

Amendment by Pub. L. 86-778 effective Sept. 13, 1960, see section

103(v)(1) of Pub. L. 86-778, set out as an Effective Date of 1960

Amendment note under section 402 of Title 42, The Public Health and

Welfare.

Amendment by Pub. L. 86-624 effective August 21, 1959, see

section 18(k) of Pub. L. 86-624, set out as a note under section

3121 of this title.

EFFECTIVE DATE OF 1959 AMENDMENT

Amendment by Pub. L. 86-70 effective Jan. 3, 1959, see section

22(i) of Pub. L. 86-70, set out as a note under section 3121 of

this title.

SAVINGS PROVISION

For provisions that nothing in amendment by section 11812(b)(13)

of Pub. L. 101-508 be construed to affect treatment of certain

transactions occurring, property acquired, or items of income,

loss, deduction, or credit taken into account prior to Nov. 5,

1990, for purposes of determining liability for tax for periods

ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101-508,

set out as a note under section 29 of this title.

-TRANS-

TRANSFER OF FUNCTIONS

For transfer of authorities, functions, personnel, and assets of

the Coast Guard, including the authorities and functions of the

Secretary of Transportation relating thereto, to the Department of

Homeland Security, and for treatment of related references, see

sections 468(b), 551(d), 552(d), and 557 of Title 6, Domestic

Security, and the Department of Homeland Security Reorganization

Plan of November 25, 2002, as modified, set out as a note under

section 542 of Title 6.

Coast Guard transferred to Department of Transportation and all

functions, powers, and duties, relating to Coast Guard, of

Secretary of the Treasury and of other offices and officers of

Department of the Treasury transferred to Secretary of

Transportation by Pub. L. 89-670, Sec. 6(b)(1), Oct. 15, 1966, 80

Stat. 938. Section 6(b)(2) of Pub. L. 89-670, however, provided

that notwithstanding such transfer of functions, Coast Guard shall

operate as part of Navy in time of war or when President directs as

provided in section 3 of Title 14, Coast Guard. See section 108 of

Title 49, Transportation.

-MISC2-

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, 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.

AUTHORS OR ARTISTS PERFORMING SERVICES UNDER CONTRACT WITH

CORPORATION

Pub. L. 96-605, title IV, Sec. 402, Dec. 28, 1980, 94 Stat. 3532,

as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.

2095, provided that:

"(a) In General. - An author or artist performing services under

contract with a corporation shall be considered as an employee of

the corporation for the purpose of applying the provisions

specified in section 7701(a)(20) of the Internal Revenue Code of

1986 [formerly I.R.C. 1954], if, on December 31, 1977, such author

or artist was a participant in one or more of the pension,

profit-sharing or annuity plans of such corporation which are

described in subsection (b)(2).

"(b) Definitions. - For purposes of this section -

"(1) Contract. - The term 'contract' means a contract which

during its term -

"(A) requires such author or artist to give the corporation

first reading or first refusal on writings or drawings of

specified types, and prohibits him from offering any such

writing or drawing to any other publication unless it has been

offered to and rejected by the corporation; or

"(B) requires such author or artist to use his best efforts

to produce work of specified types for the corporation.

"(2) Corporation. - The term 'corporation' means a corporation

which for at least 15 years prior to January 1, 1978, had in

effect one or more pension, profit-sharing and annuity plans,

each of which -

"(A) had contained from its inception a definition of the

term 'employee' that included the category of 'authors and

artists under contract', and

"(B) had been determined by the Secretary of the Treasury

(taking into account the definition described in subparagraph

(A)) to be a qualified plan within part I of subchapter D of

chapter 1 of subtitle A of the Internal Revenue Code of 1986

[section 401 et seq. of this title] for all of such years.

"(c) Effective Date. - The provisions of this section shall apply

to taxable years ending after December 31, 1980."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 56, 118, 168, 246A, 269B,

312, 357, 362, 401, 408, 408A, 542, 593, 597, 679, 682, 853, 860F,

865, 877, 881, 884, 904, 958, 988, 993, 1246, 1247, 1249, 1313,

1341, 3405, 4975, 6038, 6038A, 6039F, 6046, 6059, 6694, 7213 of

this title; title 4 section 114; title 5 section 8351; title 6

section 395; title 12 sections 1464, 1467a, 1823; title 22 sections

2314, 2755; title 29 section 1108; title 42 section 1320a-7e.

-FOOTNOTE-

(!1) See References in Text note below.

(!2) See References in Text note below.

(!3) So in original. Probably should be "Reconciliation".

-End-

-CITE-

26 USC Sec. 7702 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7702. Life insurance contract defined

-STATUTE-

(a) General rule

For purposes of this title, the term "life insurance contract"

means any contract which is a life insurance contract under the

applicable law, but only if such contract -

(1) meets the cash value accumulation test of subsection (b),

or

(2)(A) meets the guideline premium requirements of subsection

(c), and

(B) falls within the cash value corridor of subsection (d).

(b) Cash value accumulation test for subsection (a)(1)

(1) In general

A contract meets the cash value accumulation test of this

subsection if, by the terms of the contract, the cash surrender

value of such contract may not at any time exceed the net single

premium which would have to be paid at such time to fund future

benefits under the contract.

(2) Rules for applying paragraph (1)

Determinations under paragraph (1) shall be made -

(A) on the basis of interest at the greater of an annual

effective rate of 4 percent or the rate or rates guaranteed on

issuance of the contract,

(B) on the basis of the rules of subparagraph (B)(i) (and, in

the case of qualified additional benefits, subparagraph

(B)(ii)) of subsection (c)(3), and

(C) by taking into account under subparagraphs (A) and (D) of

subsection (e)(1) only current and future death benefits and

qualified additional benefits.

(c) Guideline premium requirements

For purposes of this section -

(1) In general

A contract meets the guideline premium requirements of this

subsection if the sum of the premiums paid under such contract

does not at any time exceed the guideline premium limitation as

of such time.

(2) Guideline premium limitation

The term "guideline premium limitation" means, as of any date,

the greater of -

(A) the guideline single premium, or

(B) the sum of the guideline level premiums to such date.

(3) Guideline single premium

(A) In general

The term "guideline single premium" means the premium at

issue with respect to future benefits under the contract.

(B) Basis on which determination is made

The determination under subparagraph (A) shall be based on -

(i) reasonable mortality charges which meet the

requirements (if any) prescribed in regulations and which

(except as provided in regulations) do not exceed the

mortality charges specified in the prevailing commissioners'

standard tables (as defined in section 807(d)(5)) as of the

time the contract is issued,

(ii) any reasonable charges (other than mortality charges)

which (on the basis of the company's experience, if any, with

respect to similar contracts) are reasonably expected to be

actually paid, and

(iii) interest at the greater of an annual effective rate

of 6 percent or the rate or rates guaranteed on issuance of

the contract.

(C) When determination made

Except as provided in subsection (f)(7), the determination

under subparagraph (A) shall be made as of the time the

contract is issued.

(D) Special rules for subparagraph (B)(ii)

(i) Charges not specified in the contract

If any charge is not specified in the contract, the amount

taken into account under subparagraph (B)(ii) for such charge

shall be zero.

(ii) New companies, etc.

If any company does not have adequate experience for

purposes of the determination under subparagraph (B)(ii), to

the extent provided in regulations, such determination shall

be made on the basis of the industry-wide experience.

(4) Guideline level premium

The term "guideline level premium" means the level annual

amount, payable over a period not ending before the insured

attains age 95, computed on the same basis as the guideline

single premium, except that paragraph (3)(B)(iii) shall be

applied by substituting "4 percent" for "6 percent".

(d) Cash value corridor for purposes of subsection (a)(2)(B)

For purposes of this section -

(1) In general

A contract falls within the cash value corridor of this

subsection if the death benefit under the contract at any time is

not less than the applicable percentage of the cash surrender

value.

(2) Applicable percentage

In the case of an insured The applicable percentage

with an attained age as shall decrease by a

of the beginning of the ratable portion for each

contract year of: full year:

T2More than: 2But not T2From: To:

more than:

--------------------------------------------------------------------

0 40 250 250

40 45 250 215

45 50 215 185

50 55 185 150

55 60 150 130

60 65 130 120

65 70 120 115

70 75 115 105

75 90 105 105

90 95 105 100.

--------------------------------------------------------------------

(e) Computational rules

(1) In general

For purposes of this section (other than subsection (d)) -

(A) the death benefit (and any qualified additional benefit)

shall be deemed not to increase,

(B) the maturity date, including the date on which any

benefit described in subparagraph (C) is payable, shall be

deemed to be no earlier than the day on which the insured

attains age 95, and no later than the day on which the insured

attains age 100,

(C) the death benefits shall be deemed to be provided until

the maturity date determined by taking into account

subparagraph (B), and

(D) the amount of any endowment benefit (or sum of endowment

benefits, including any cash surrender value on the maturity

date determined by taking into account subparagraph (B)) shall

be deemed not to exceed the least amount payable as a death

benefit at any time under the contract.

(2) Limited increases in death benefit permitted

Notwithstanding paragraph (1)(A) -

(A) for purposes of computing the guideline level premium, an

increase in the death benefit which is provided in the contract

may be taken into account but only to the extent necessary to

prevent a decrease in the excess of the death benefit over the

cash surrender value of the contract,

(B) for purposes of the cash value accumulation test, the

increase described in subparagraph (A) may be taken into

account if the contract will meet such test at all times

assuming that the net level reserve (determined as if level

annual premiums were paid for the contract over a period not

ending before the insured attains age 95) is substituted for

the net single premium, and

(C) for purposes of the cash value accumulation test, the

death benefit increases may be taken into account if the

contract -

(i) has an initial death benefit of $5,000 or less and a

maximum death benefit of $25,000 or less,

(ii) provides for a fixed predetermined annual increase not

to exceed 10 percent of the initial death benefit or 8

percent of the death benefit at the end of the preceding

year, and

(iii) was purchased to cover payment of burial expenses or

in connection with prearranged funeral expenses.

For purposes of subparagraph (C), the initial death benefit of a

contract shall be determined by treating all contracts issued to

the same contract owner as 1 contract.

(f) Other definitions and special rules

For purposes of this section -

(1) Premiums paid

(A) In general

The term "premiums paid" means the premiums paid under the

contract less amounts (other than amounts includible in gross

income) to which section 72(e) applies and less any excess

premiums with respect to which there is a distribution

described in subparagraph (B) or (E) of paragraph (7) and any

other amounts received with respect to the contract which are

specified in regulations.

(B) Treatment of certain premiums returned to policyholder

If, in order to comply with the requirements of subsection

(a)(2)(A), any portion of any premium paid during any contract

year is returned by the insurance company (with interest)

within 60 days after the end of a contract year, the amount so

returned (excluding interest) shall be deemed to reduce the sum

of the premiums paid under the contract during such year.

(C) Interest returned includible in gross income

Notwithstanding the provisions of section 72(e), the amount

of any interest returned as provided in subparagraph (B) shall

be includible in the gross income of the recipient.

(2) Cash values

(A) Cash surrender value

The cash surrender value of any contract shall be its cash

value determined without regard to any surrender charge, policy

loan, or reasonable termination dividends.

(B) Net surrender value

The net surrender value of any contract shall be determined

with regard to surrender charges but without regard to any

policy loan.

(3) Death benefit

The term "death benefit" means the amount payable by reason of

the death of the insured (determined without regard to any

qualified additional benefits).

(4) Future benefits

The term "future benefits" means death benefits and endowment

benefits.

(5) Qualified additional benefits

(A) In general

The term "qualified additional benefits" means any -

(i) guaranteed insurability,

(ii) accidental death or disability benefit,

(iii) family term coverage,

(iv) disability waiver benefit, or

(v) other benefit prescribed under regulations.

(B) Treatment of qualified additional benefits

For purposes of this section, qualified additional benefits

shall not be treated as future benefits under the contract, but

the charges for such benefits shall be treated as future

benefits.

(C) Treatment of other additional benefits

In the case of any additional benefit which is not a

qualified additional benefit -

(i) such benefit shall not be treated as a future benefit,

and

(ii) any charge for such benefit which is not prefunded

shall not be treated as a premium.

(6) Premium payments not disqualifying contract

The payment of a premium which would result in the sum of the

premiums paid exceeding the guideline premium limitation shall be

disregarded for purposes of subsection (a)(2) if the amount of

such premium does not exceed the amount necessary to prevent the

termination of the contract on or before the end of the contract

year (but only if the contract will have no cash surrender value

at the end of such extension period).

(7) Adjustments

(A) In general

If there is a change in the benefits under (or in other terms

of) the contract which was not reflected in any previous

determination or adjustment made under this section, there

shall be proper adjustments in future determinations made under

this section.

(B) Rule for certain changes during first 15 years

If -

(i) a change described in subparagraph (A) reduces benefits

under the contract,

(ii) the change occurs during the 15-year period beginning

on the issue date of the contract, and

(iii) a cash distribution is made to the policyholder as a

result of such change,

section 72 (other than subsection (e)(5) thereof) shall apply

to such cash distribution to the extent it does not exceed the

recapture ceiling determined under subparagraph (C) or (D)

(whichever applies).

(C) Recapture ceiling where change occurs during first 5 years

If the change referred to in subparagraph (B)(ii) occurs

during the 5-year period beginning on the issue date of the

contract, the recapture ceiling is -

(i) in the case of a contract to which subsection (a)(1)

applies, the excess of -

(I) the cash surrender value of the contract, immediately

before the reduction, over

(II) the net single premium (determined under subsection

(b)), immediately after the reduction, or

(ii) in the case of a contract to which subsection (a)(2)

applies, the greater of -

(I) the excess of the aggregate premiums paid under the

contract, immediately before the reduction, over the

guideline premium limitation for the contract (determined

under subsection (c)(2), taking into account the adjustment

described in subparagraph (A)), or

(II) the excess of the cash surrender value of the

contract, immediately before the reduction, over the cash

value corridor of subsection (d) (determined immediately

after the reduction).

(D) Recapture ceiling where change occurs after 5th year and

before 16th year

If the change referred to in subparagraph (B) occurs after

the 5-year period referred to under subparagraph (C), the

recapture ceiling is the excess of the cash surrender value of

the contract, immediately before the reduction, over the cash

value corridor of subsection (d) (determined immediately after

the reduction and whether or not subsection (d) applies to the

contract).

(E) Treatment of certain distributions made in anticipation of

benefit reductions

Under regulations prescribed by the Secretary, subparagraph

(B) shall apply also to any distribution made in anticipation

of a reduction in benefits under the contract. For purposes of

the preceding sentence, appropriate adjustments shall be made

in the provisions of subparagraphs (C) and (D); and any

distribution which reduces the cash surrender value of a

contract and which is made within 2 years before a reduction in

benefits under the contract shall be treated as made in

anticipation of such reduction.

(8) Correction of errors

If the taxpayer establishes to the satisfaction of the

Secretary that -

(A) the requirements described in subsection (a) for any

contract year were not satisfied due to reasonable error, and

(B) reasonable steps are being taken to remedy the error,

the Secretary may waive the failure to satisfy such requirements.

(9) Special rule for variable life insurance contracts

In the case of any contract which is a variable contract (as

defined in section 817), the determination of whether such

contract meets the requirements of subsection (a) shall be made

whenever the death benefits under such contract change but not

less frequently than once during each 12-month period.

(g) Treatment of contracts which do not meet subsection (a) test

(1) Income inclusion

(A) In general

If at any time any contract which is a life insurance

contract under the applicable law does not meet the definition

of life insurance contract under subsection (a), the income on

the contract for any taxable year of the policyholder shall be

treated as ordinary income received or accrued by the

policyholder during such year.

(B) Income on the contract

For purposes of this paragraph, the term "income on the

contract" means, with respect to any taxable year of the

policyholder, the excess of -

(i) the sum of -

(I) the increase in the net surrender value of the

contract during the taxable year, and

(II) the cost of life insurance protection provided under

the contract during the taxable year, over

(ii) the premiums paid (as defined in subsection (f)(1))

under the contract during the taxable year.

(C) Contracts which cease to meet definition

If, during any taxable year of the policyholder, a contract

which is a life insurance contract under the applicable law

ceases to meet the definition of life insurance contract under

subsection (a), the income on the contract for all prior

taxable years shall be treated as received or accrued during

the taxable year in which such cessation occurs.

(D) Cost of life insurance protection

For purposes of this paragraph, the cost of life insurance

protection provided under the contract shall be the lesser of -

(i) the cost of individual insurance on the life of the

insured as determined on the basis of uniform premiums

(computed on the basis of 5-year age brackets) prescribed by

the Secretary by regulations, or

(ii) the mortality charge (if any) stated in the contract.

(2) Treatment of amount paid on death of insured

If any contract which is a life insurance contract under the

applicable law does not meet the definition of life insurance

contract under subsection (a), the excess of the amount paid by

the reason of the death of the insured over the net surrender

value of the contract shall be deemed to be paid under a life

insurance contract for purposes of section 101 and subtitle B.

(3) Contract continues to be treated as insurance contract

If any contract which is a life insurance contract under the

applicable law does not meet the definition of life insurance

contract under subsection (a), such contract shall,

notwithstanding such failure, be treated as an insurance contract

for purposes of this title.

(h) Endowment contracts receive same treatment

(1) In general

References in subsections (a) and (g) to a life insurance

contract shall be treated as including references to a contract

which is an endowment contract under the applicable law.

(2) Definition of endowment contract

For purposes of this title (other than paragraph (1)), the term

"endowment contract" means a contract which is an endowment

contract under the applicable law and which meets the

requirements of subsection (a).

(i) Transitional rule for certain 20-pay contracts

(1) In general

In the case of a qualified 20-pay contract, this section shall

be applied by substituting "3 percent" for "4 percent" in

subsection (b)(2).

(2) Qualified 20-pay contract

For purposes of paragraph (1), the term "qualified 20-pay

contract" means any contract which -

(A) requires at least 20 nondecreasing annual premium

payments, and

(B) is issued pursuant to an existing plan of insurance.

(3) Existing plan of insurance

For purposes of this subsection, the term "existing plan of

insurance" means, with respect to any contract, any plan of

insurance which was filed by the company issuing such contract in

1 or more States before September 28, 1983, and is on file in the

appropriate State for such contract.

(j) Certain church self-funded death benefit plans treated as life

insurance

(1) In general

In determining whether any plan or arrangement described in

paragraph (2) is a life insurance contract, the requirement of

subsection (a) that the contract be a life insurance contract

under applicable law shall not apply.

(2) Description

For purposes of this subsection, a plan or arrangement is

described in this paragraph if -

(A) such plan or arrangement provides for the payment of

benefits by reason of the death of the individuals covered

under such plan or arrangement, and

(B) such plan or arrangement is provided by a church for the

benefit of its employees and their beneficiaries, directly or

through an organization described in section 414(e)(3)(A) or an

organization described in section 414(e)(3)(B)(ii).

(3) Definitions

For purposes of this subsection -

(A) Church

The term "church" means a church or a convention or

association of churches.

(B) Employee

The term "employee" includes an employee described in section

414(e)(3)(B).

(k) Regulations

The Secretary shall prescribe such regulations as may be

necessary or appropriate to carry out the purposes of this section.

-SOURCE-

(Added Pub. L. 98-369, div. A, title II, Sec. 221(a), July 18,

1984, 98 Stat. 767; amended Pub. L. 99-514, title XVIII, Sec.

1825(a)-(c), Oct. 22, 1986, 100 Stat. 2846-2848; Pub. L. 100-647,

title V, Sec. 5011(a), (b), title VI, Sec. 6078(a), Nov. 10, 1988,

102 Stat. 3660, 3661, 3709.)

-MISC1-

AMENDMENTS

1988 - Subsec. (c)(3)(B)(i), (ii). Pub. L. 100-647, Sec. 5011(a),

added cls. (i) and (ii) and struck out former cls. (i) and (ii)

which read as follows:

"(i) the mortality charges specified in the contract (or, if none

is specified, the mortality charges used in determining the

statutory reserves for such contract),

"(ii) any charges (not taken into account under clause (i))

specified in the contract (the amount of any charge not so

specified shall be treated as zero), and".

Subsec. (c)(3)(D). Pub. L. 100-647, Sec. 5011(b), added subpar.

(D).

Subsecs. (j), (k). Pub. L. 100-647, Sec. 6078(a), added subsec.

(j) and redesignated former subsec. (j) as (k).

1986 - Subsec. (b)(2)(C). Pub. L. 99-514, Sec. 1825(a)(2),

substituted "subparagraphs (A) and (D)" for "subparagraphs (A) and

(C)".

Subsec. (e)(1). Pub. L. 99-514, Sec. 1825(a)(3), inserted "(other

than subsection (d))" after "section".

Subsec. (e)(1)(B). Pub. L. 99-514, Sec. 1825(a)(1)(A),

substituted "shall be deemed to be no earlier than" for "shall be

no earlier than".

Subsec. (e)(1)(C). Pub. L. 99-514, Sec. 1821(a)(1)(C), added

subpar. (C). Former subpar. (C) redesignated (D).

Subsec. (e)(1)(D). Pub. L. 99-514, Sec. 1821(a)(1)(C), (D),

redesignated subpar. (C) as (D) and substituted "the maturity date

determined by taking into account subparagraph (B)" for "the

maturity date described in subparagraph (B)".

Subsec. (e)(2)(C). Pub. L. 99-514, Sec. 1825(a)(4), added subpar.

(C).

Subsec. (f)(1)(A). Pub. L. 99-514, Sec. 1825(b)(2), substituted

"less any excess premiums with respect to which there is a

distribution described in subparagraph (B) or (E) of paragraph (7)

and any other amounts received" for "less any other amounts

received".

Subsec. (f)(7). Pub. L. 99-514, Sec. 1825(b)(1), amended par. (7)

generally. Prior to amendment, par. (7)(A), in general, read as

follows: "In the event of a change in the future benefits or any

qualified additional benefit (or in any other terms) under the

contract which was not reflected in any previous determination made

under this section, under regulations prescribed by the Secretary,

there shall be proper adjustments in future determinations made

under this section.", and par. (7)(B), certain changes treated as

exchange, read as follows: "In the case of any change which reduces

the future benefits under the contract, such change shall be

treated as an exchange of the contract for another contract."

Subsec. (g)(1)(B)(ii). Pub. L. 99-514, Sec. 1825(c), amended cl.

(ii) generally. Prior to amendment, cl. (ii) read as follows: "the

amount of premiums paid under the contract during the taxable year

reduced by any policyholder dividends received during such taxable

year."

EFFECTIVE DATE OF 1988 AMENDMENT

Section 5011(d) of Pub. L. 100-647 provided that: "The amendments

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

contracts entered into on or after October 21, 1988."

Section 6078(b) of Pub. L. 100-647 provided that: "The amendment

made by subsection (a) [amending this section] shall take effect as

if included in the amendment made by section 221(a) of the Tax

Reform Act of 1984 [Pub. L. 98-369, which enacted this section]."

EFFECTIVE DATE OF 1986 AMENDMENT

Section 1825(a)(4) of Pub. L. 99-514, as amended by Pub. L.

100-647, title I, Sec. 1018(j), Nov. 10, 1988, 102 Stat. 3583,

provided that the amendment made by that section is effective with

respect to contracts entered into after Oct. 22, 1986.

Amendment by section 1825(a)(1)-(3), (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

Section 221(d) of Pub. L. 98-369, as amended by Pub. L. 99-514,

Sec. 2, title XVIII, Secs. 1825(e), 1899A(69), Oct. 22, 1986, 100

Stat. 2095, 2848, 2962, provided that:

"(1) In general. - Except as otherwise provided in this

subsection, the amendments made by this section [enacting this

section and amending section 101 of this title and provisions set

out as a note under section 101 of this title] shall apply to

contracts issued after December 31, 1984, in taxable years ending

after such date.

"(2) Special rule for certain contracts issued after june 30,

1984. -

"(A) General rule. - Except as otherwise provided in this

paragraph, the amendments made by this section shall apply also

to any contract issued after June 30, 1984, which provides an

increasing death benefit and has premium funding more rapid than

10-year level premium payments.

"(B) Exception for certain contracts. - Subparagraph (A) shall

not apply to any contract if -

"(i) such contract (whether or not a flexible premium

contract) would meet the requirements of section 101(f) of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954],

"(ii) such contract is not a flexible premium life insurance

contract (within the meaning of section 101(f) of such Code)

and would meet the requirements of section 7702 of such Code

determined by -

"(I) substituting '3 percent' for '4 percent' in section

7702(b)(2) of such Code, and

"(II) treating subparagraph (B) of section 7702(e)(1) of

such Code as if it read as follows: 'the maturity date shall

be the latest maturity date permitted under the contract, but

not less than 20 years after the date of issue or (if

earlier) age 95', or

"(iii) under such contract -

"(I) the premiums (including any policy fees) will be

adjusted from time-to-time to reflect the level amount

necessary (but not less than zero) at the time of such

adjustment to provide a level death benefit assuming interest

crediting and an annual effective interest rate of not less

than 3 percent, or

"(II) at the option of the insured, in lieu of an

adjustment under subclause (I) there will be a comparable

adjustment in the amount of the death benefit.

"(C) Certain contracts issued before october 1, 1984. -

"(i) In general. - Subparagraph (A) shall be applied by

substituting 'September 30, 1984' for 'June 30, 1984' in the

case of a contract -

"(I) which would meet the requirements of section 7702 of

such Code if '3 percent' were substituted for '4 percent' in

section 7702(b)(2) of such Code, and the rate or rates

guaranteed on issuance of the contract were determined

without regard to any mortality charges and any initial

excess interest guarantees, and

"(II) the cash surrender value of which does not at any

time exceed the net single premium which would have to be

paid at such time to fund future benefits under the contract.

"(ii) Definitions. - For purposes of clause (i) -

"(I) In general. - Except as provided in subclause (II),

terms used in clause (i) shall have the same meanings as when

used in section 7702 of such Code.

"(II) Net single premium. - The term 'net single premium'

shall be determined by substituting '3 percent' for '4

percent' in section 7702(b)(2) of such Code, by using the

1958 standard ordinary mortality and morbidity tables of the

National Association of Insurance Commissioners, and by

assuming a level death benefit.

"(3) Transitional rule for certain existing plans of insurance. -

A plan of insurance on file in 1 or more States before September

28, 1983, shall be treated for purposes of section 7702(i)(3) of

such Code as a plan of insurance on file in 1 or more States before

September 28, 1983, without regard to whether such plan of

insurance is modified after September 28, 1983, to permit the

crediting of excess interest or similar amounts annually and not

monthly under contracts issued pursuant to such plan of insurance.

"(4) Extension of flexible premium contract provisions. - The

amendments made by subsection (b) [amending section 101 of this

title and provisions set out as a note under section 101 of this

title] shall take effect on January 1, 1984.

"(5) Special rule for master contract. - For purposes of this

subsection, in the case of a master contract, the date taken into

account with respect to any insured shall be the first date on

which such insured is covered under such contract."

INTERIM RULES; REGULATIONS; STANDARDS BEFORE REGULATIONS TAKE

EFFECT

Section 5011(c) of Pub. L. 100-647 provided that:

"(1) Regulations. - Not later than January 1, 1990, the Secretary

of the Treasury (or his delegate) shall issue regulations under

section 7702(c)(3)(B)(i) of the 1986 Code (as amended by subsection

(a)).

"(2) Standards before regulations take effect. - In the case of

any contract to which the amendments made by this section [amending

this section] apply and which is issued before the effective date

of the regulations required under paragraph (1), mortality charges

which do not differ materially from the charges actually expected

to be imposed by the company (taking into account any relevant

characteristic of the insured of which the company is aware) shall

be treated as meeting the requirements of clause (i) of section

7702(c)(3)(B) of the 1986 Code (as amended by subsection (a))."

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.

TREATMENT OF FLEXIBLE PREMIUM CONTRACTS ISSUED DURING 1984 WHICH

MEET NEW REQUIREMENTS

Section 221(b)(3) of Pub. L. 98-369, as added by Pub. L. 99-514,

title XVIII, Sec. 1825(d), Oct. 22, 1986, 100 Stat. 2848, provided

that: "Any flexible premium contract issued during 1984 which meets

the requirements of section 7702 of the Internal Revenue Code of

1954 [now 1986] (as added by this section) shall be treated as

meeting the requirements of section 101(f) of such Code."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 56, 72, 264, 817, 817A,

953, 7702A, 7702B of this title; title 15 section 6712.

-End-

-CITE-

26 USC Sec. 7702A 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7702A. Modified endowment contract defined

-STATUTE-

(a) General rule

For purposes of section 72, the term "modified endowment

contract" means any contract meeting the requirements of section

7702 -

(1) which -

(A) is entered into on or after June 21, 1988, and

(B) fails to meet the 7-pay test of subsection (b), or

(2) which is received in exchange for a contract described in

paragraph (1) or this paragraph.

(b) 7-pay test

For purposes of subsection (a), a contract fails to meet the

7-pay test of this subsection if the accumulated amount paid under

the contract at any time during the 1st 7 contract years exceeds

the sum of the net level premiums which would have been paid on or

before such time if the contract provided for paid-up future

benefits after the payment of 7 level annual premiums.

(c) Computational rules

(1) In general

Except as provided in this subsection, the determination under

subsection (b) of the 7 level annual premiums shall be made -

(A) as of the time the contract is issued, and

(B) by applying the rules of section 7702(b)(2) and of

section 7702(e) (other than paragraph (2)(C) thereof), except

that the death benefit provided for the 1st contract year shall

be deemed to be provided until the maturity date without regard

to any scheduled reduction after the 1st 7 contract years.

(2) Reduction in benefits during 1st 7 years

(A) In general

If there is a reduction in benefits under the contract within

the 1st 7 contract years, this section shall be applied as if

the contract had originally been issued at the reduced benefit

level.

(B) Reductions attributable to nonpayment of premiums

Any reduction in benefits attributable to the nonpayment of

premiums due under the contract shall not be taken into account

under subparagraph (A) if the benefits are reinstated within 90

days after the reduction in such benefits.

(3) Treatment of material changes

(A) In general

If there is a material change in the benefits under (or in

other terms of) the contract which was not reflected in any

previous determination under this section, for purposes of this

section -

(i) such contract shall be treated as a new contract

entered into on the day on which such material change takes

effect, and

(ii) appropriate adjustments shall be made in determining

whether such contract meets the 7-pay test of subsection (b)

to take into account the cash surrender value under the

contract.

(B) Treatment of certain benefit increases

For purposes of subparagraph (A), the term "material change"

includes any increase in the death benefit under the contract

or any increase in, or addition of, a qualified additional

benefit under the contract. Such term shall not include -

(i) any increase which is attributable to the payment of

premiums necessary to fund the lowest level of the death

benefit and qualified additional benefits payable in the 1st

7 contract years (determined after taking into account death

benefit increases described in subparagraph (A) or (B) of

section 7702(e)(2)) or to crediting of interest or other

earnings (including policyholder dividends) in respect of

such premiums, and

(ii) to the extent provided in regulations, any

cost-of-living increase based on an established broad-based

index if such increase is funded ratably over the remaining

period during which premiums are required to be paid under

the contract.

(4) Special rule for contracts with death benefits of $10,000 or

less

In the case of a contract -

(A) which provides an initial death benefit of $10,000 or

less, and

(B) which requires at least 7 nondecreasing annual premium

payments,

each of the 7 level annual premiums determined under subsection

(b) (without regard to this paragraph) shall be increased by $75.

For purposes of this paragraph, the contract involved and all

contracts previously issued to the same policyholder by the same

company shall be treated as one contract.

(5) Regulatory authority for certain collection expenses

The Secretary may by regulations prescribe rules for taking

into account expenses solely attributable to the collection of

premiums paid more frequently than annually.

(6) Treatment of certain contracts with more than one insured

If -

(A) a contract provides a death benefit which is payable only

upon the death of 1 insured following (or occurring

simultaneously with) the death of another insured, and

(B) there is a reduction in such death benefit below the

lowest level of such death benefit provided under the contract

during the 1st 7 contract years,

this section shall be applied as if the contract had originally

been issued at the reduced benefit level.

(d) Distributions affected

If a contract fails to meet the 7-pay test of subsection (b),

such contract shall be treated as failing to meet such requirements

only in the case of -

(1) distributions during the contract year in which the failure

takes effect and during any subsequent contract year, and

(2) under regulations prescribed by the Secretary,

distributions (not described in paragraph (1)) in anticipation of

such failure.

For purposes of the preceding sentence, any distribution which is

made within 2 years before the failure to meet the 7-pay test shall

be treated as made in anticipation of such failure.

(e) Definitions

For purposes of this section -

(1) Amount paid

(A) In general

The term "amount paid" means -

(i) the premiums paid under the contract, reduced by

(ii) amounts to which section 72(e) applies (determined

without regard to paragraph (4)(A) thereof) but not including

amounts includible in gross income.

(B) Treatment of certain premiums returned

If, in order to comply with the requirements of subsection

(b), any portion of any premium paid during any contract year

is returned by the insurance company (with interest) within 60

days after the end of such contract year, the amount so

returned (excluding interest) shall be deemed to reduce the sum

of the premiums paid under the contract during such contract

year.

(C) Interest returned includible in gross income

Notwithstanding the provisions of section 72(e), the amount

of any interest returned as provided in subparagraph (B) shall

be includible in the gross income of the recipient.

(2) Contract year

The term "contract year" means the 12-month period beginning

with the 1st month for which the contract is in effect, and each

12-month period beginning with the corresponding month in

subsequent calendar years.

(3) Other terms

Except as otherwise provided in this section, terms used in

this section shall have the same meaning as when used in section

7702.

-SOURCE-

(Added Pub. L. 100-647, title V, Sec. 5012(c)(1), Nov. 10, 1988,

102 Stat. 3662; amended Pub. L. 101-239, title VII, Secs. 7647(a),

7815(a)(1), (4), Dec. 19, 1989, 103 Stat. 2382, 2414; Pub. L.

106-554, Sec. 1(a)(7) [title III, Sec. 318(a)(1), (2)], Dec. 21,

2000, 114 Stat. 2763, 2763A-645; Pub. L. 107-147, title IV, Sec.

416(f), Mar. 9, 2002, 116 Stat. 55.)

-MISC1-

AMENDMENTS

2002 - Subsec. (c)(3)(A)(ii). Pub. L. 107-147 repealed Pub. L.

106-554, Sec. 1(a)(7) [title III, Sec. 318(a)(2)]. See 2000

Amendment note below.

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

Sec. 318(a)(1)], inserted "or this paragraph" before period at end.

Subsec. (c)(3)(A)(ii). Pub. L. 106-554, Sec. 1(a)(7) [title III,

Sec. 318(a)(2)], which substituted "under the old contract" for

"under the contract", was repealed by Pub. L. 107-147. See

Construction of 2002 Amendment note below.

1989 - Subsec. (c)(3)(B). Pub. L. 101-239, Sec. 7815(a)(1),

substituted "benefit increases" for "increases in future benefits"

in heading and amended text generally. Prior to amendment, text

read as follows: "For purposes of subparagraph (A), the term

'material change' includes any increase in future benefits under

the contract. Such term shall not include -

"(i) any increase which is attributable to the payment of

premiums necessary to fund the lowest level of future benefits

payable in the 1st 7 contract years (determined after taking into

account death benefit increases described in subparagraph (A) or

(B) of section 7702(e)(2)) or to crediting of interest or other

earnings (including policyholder dividends) in respect of such

premiums, and

"(ii) to the extent provided in regulations, any cost-of-living

increase based on an established broad-based index if such

increase is funded ratably over the remaining life of the the

contract."

Subsec. (c)(4). Pub. L. 101-239, Sec. 7815(a)(4), substituted "of

$10,000 or less" for "under $10,000" in heading and "the same

policyholder" for "the same insurer" in concluding provisions.

Subsec. (c)(6). Pub. L. 101-239, Sec. 7647(a), added par. (6).

EFFECTIVE DATE OF 2000 AMENDMENT

Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 318(a)(3)], Dec.

21, 2000, 114 Stat. 2763, 2763A-645, provided that: "The amendments

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

as if included in the amendments made by section 5012 of the

Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100-647]."

EFFECTIVE DATE OF 1989 AMENDMENT

Section 7647(b) of Pub. L. 101-239 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

contracts entered into on or after September 14, 1989."

Amendment by section 7815(a)(1), (4) of Pub. L. 101-239

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

provision of the Technical and Miscellaneous Revenue Act of 1988,

Pub. L. 100-647, to which such amendment relates, see section 7817

of Pub. L. 101-239, set out as a note under section 1 of this

title.

EFFECTIVE DATE

Section 5012(e) of Pub. L. 100-647, as amended by Pub. L.

101-239, title VII, Sec. 7815(a)(2), Dec. 19, 1989, 103 Stat. 2414,

provided that:

"(1) In general. - Except as otherwise provided in this

subsection, the amendments made by this section [enacting this

section and amending sections 26 and 72 of this title] shall apply

to contracts entered into on or after June 21, 1988.

"(2) Special rule where death benefit increases by more than

$150,000. - If the death benefit under the contract increases by

more than $150,000 over the death benefit under the contract in

effect on October 20, 1988, the rules of section 7702A(c)(3) of the

1986 Code (as added by this section) shall apply in determining

whether such contract is issued on or after June 21, 1988. The

preceding sentence shall not apply in the case of a contract which,

as of June 21, 1988, required at least 7 level annual premium

payments and under which the policyholder makes at least 7 level

annual premium payments.

"(3) Certain other material changes taken into account. - A

contract entered into before June 21, 1988, shall be treated as

entered into after such date if -

"(A) on or after June 21, 1988, the death benefit under the

contract is increased (or a qualified additional benefit is

increased or added) and before June 21, 1988, the owner of the

contract did not have a unilateral right under the contract to

obtain such increase or addition without providing additional

evidence of insurability, or

"(B) the contract is converted after June 20, 1988, from a term

life insurance contract to a life insurance contract providing

coverage other than term life insurance coverage without regard

to any right of the owner of the contract to such conversion.

"(4) Certain exchanges permitted. - In the case of a modified

endowment contract which -

"(A) required at least 7 annual level premium payments,

"(B) is entered into after June 20, 1988, and before the date

of the enactment of this Act [Nov. 10, 1988], and

"(C) is exchanged within 3 months after such date of enactment

for a life insurance contract which meets the requirements of

section 7702A(b),

the contract which is received in exchange for such contract shall

not be treated as a modified endowment contract if the taxpayer

elects, notwithstanding section 1035 of the 1986 Code, to recognize

gain on such exchange.

"(5) Special rule for annuity contracts. - In the case of annuity

contracts, the amendments made by subsection (d) [amending section

72 of this title] shall apply to contracts entered into after

October 21, 1988."

CONSTRUCTION OF 2002 AMENDMENT

Pub. L. 107-147, title IV, Sec. 416(f), Mar. 9, 2002, 116 Stat.

55, provided that: "Paragraph (2) of section 318(a) of the

Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by

section 1(a)(7) of Pub. L. 106-554](114 Stat. 2763A-645) [amending

this section] is repealed, and clause (ii) of section

7702A(c)(3)(A) shall read and be applied as if the amendment made

by such paragraph had not been enacted."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 72, 264, 817A of this

title.

-End-

-CITE-

26 USC Sec. 7702B 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7702B. Treatment of qualified long-term care insurance

-STATUTE-

(a) In general

For purposes of this title -

(1) a qualified long-term care insurance contract shall be

treated as an accident and health insurance contract,

(2) amounts (other than policyholder dividends, as defined in

section 808, or premium refunds) received under a qualified

long-term care insurance contract shall be treated as amounts

received for personal injuries and sickness and shall be treated

as reimbursement for expenses actually incurred for medical care

(as defined in section 213(d)),

(3) any plan of an employer providing coverage under a

qualified long-term care insurance contract shall be treated as

an accident and health plan with respect to such coverage,

(4) except as provided in subsection (e)(3), amounts paid for a

qualified long-term care insurance contract providing the

benefits described in subsection (b)(2)(A) shall be treated as

payments made for insurance for purposes of section 213(d)(1)(D),

and

(5) a qualified long-term care insurance contract shall be

treated as a guaranteed renewable contract subject to the rules

of section 816(e).

(b) Qualified long-term care insurance contract

For purposes of this title -

(1) In general

The term "qualified long-term care insurance contract" means

any insurance contract if -

(A) the only insurance protection provided under such

contract is coverage of qualified long-term care services,

(B) such contract does not pay or reimburse expenses incurred

for services or items to the extent that such expenses are

reimbursable under title XVIII of the Social Security Act or

would be so reimbursable but for the application of a

deductible or coinsurance amount,

(C) such contract is guaranteed renewable,

(D) such contract does not provide for a cash surrender value

or other money that can be -

(i) paid, assigned, or pledged as collateral for a loan, or

(ii) borrowed,

other than as provided in subparagraph (E) or paragraph (2)(C),

(E) all refunds of premiums, and all policyholder dividends

or similar amounts, under such contract are to be applied as a

reduction in future premiums or to increase future benefits,

and

(F) such contract meets the requirements of subsection (g).

(2) Special rules

(A) Per diem, etc. payments permitted

A contract shall not fail to be described in subparagraph (A)

or (B) of paragraph (1) by reason of payments being made on a

per diem or other periodic basis without regard to the expenses

incurred during the period to which the payments relate.

(B) Special rules relating to medicare

(i) Paragraph (1)(B) shall not apply to expenses which are

reimbursable under title XVIII of the Social Security Act only

as a secondary payor.

(ii) No provision of law shall be construed or applied so as

to prohibit the offering of a qualified long-term care

insurance contract on the basis that the contract coordinates

its benefits with those provided under such title.

(C) Refunds of premiums

Paragraph (1)(E) shall not apply to any refund on the death

of the insured, or on a complete surrender or cancellation of

the contract, which cannot exceed the aggregate premiums paid

under the contract. Any refund on a complete surrender or

cancellation of the contract shall be includible in gross

income to the extent that any deduction or exclusion was

allowable with respect to the premiums.

(c) Qualified long-term care services

For purposes of this section -

(1) In general

The term "qualified long-term care services" means necessary

diagnostic, preventive, therapeutic, curing, treating,

mitigating, and rehabilitative services, and maintenance or

personal care services, which -

(A) are required by a chronically ill individual, and

(B) are provided pursuant to a plan of care prescribed by a

licensed health care practitioner.

(2) Chronically ill individual

(A) In general

The term "chronically ill individual" means any individual

who has been certified by a licensed health care practitioner

as -

(i) being unable to perform (without substantial assistance

from another individual) at least 2 activities of daily

living for a period of at least 90 days due to a loss of

functional capacity,

(ii) having a level of disability similar (as determined

under regulations prescribed by the Secretary in consultation

with the Secretary of Health and Human Services) to the level

of disability described in clause (i), or

(iii) requiring substantial supervision to protect such

individual from threats to health and safety due to severe

cognitive impairment.

Such term shall not include any individual otherwise meeting

the requirements of the preceding sentence unless within the

preceding 12-month period a licensed health care practitioner

has certified that such individual meets such requirements.

(B) Activities of daily living

For purposes of subparagraph (A), each of the following is an

activity of daily living:

(i) Eating.

(ii) Toileting.

(iii) Transferring.

(iv) Bathing.

(v) Dressing.

(vi) Continence.

A contract shall not be treated as a qualified long-term care

insurance contract unless the determination of whether an

individual is a chronically ill individual described in

subparagraph (A)(i) takes into account at least 5 of such

activities.

(3) Maintenance or personal care services

The term "maintenance or personal care services" means any care

the primary purpose of which is the provision of needed

assistance with any of the disabilities as a result of which the

individual is a chronically ill individual (including the

protection from threats to health and safety due to severe

cognitive impairment).

(4) Licensed health care practitioner

The term "licensed health care practitioner" means any

physician (as defined in section 1861(r)(1) of the Social

Security Act) and any registered professional nurse, licensed

social worker, or other individual who meets such requirements as

may be prescribed by the Secretary.

(d) Aggregate payments in excess of limits

(1) In general

If the aggregate of -

(A) the periodic payments received for any period under all

qualified long-term care insurance contracts which are treated

as made for qualified long-term care services for an insured,

and

(B) the periodic payments received for such period which are

treated under section 101(g) as paid by reason of the death of

such insured,

exceeds the per diem limitation for such period, such excess

shall be includible in gross income without regard to section 72.

A payment shall not be taken into account under subparagraph (B)

if the insured is a terminally ill individual (as defined in

section 101(g)) at the time the payment is received.

(2) Per diem limitation

For purposes of paragraph (1), the per diem limitation for any

period is an amount equal to the excess (if any) of -

(A) the greater of -

(i) the dollar amount in effect for such period under

paragraph (4), or

(ii) the costs incurred for qualified long-term care

services provided for the insured for such period, over

(B) the aggregate payments received as reimbursements

(through insurance or otherwise) for qualified long-term care

services provided for the insured during such period.

(3) Aggregation rules

For purposes of this subsection -

(A) all persons receiving periodic payments described in

paragraph (1) with respect to the same insured shall be treated

as 1 person, and

(B) the per diem limitation determined under paragraph (2)

shall be allocated first to the insured and any remaining

limitation shall be allocated among the other such persons in

such manner as the Secretary shall prescribe.

(4) Dollar amount

The dollar amount in effect under this subsection shall be $175

per day (or the equivalent amount in the case of payments on

another periodic basis).

(5) Inflation adjustment

In the case of a calendar year after 1997, the dollar amount

contained in paragraph (4) shall be increased at the same time

and in the same manner as amounts are increased pursuant to

section 213(d)(10).

(6) Periodic payments

For purposes of this subsection, the term "periodic payment"

means any payment (whether on a periodic basis or otherwise) made

without regard to the extent of the costs incurred by the payee

for qualified long-term care services.

(e) Treatment of coverage provided as part of a life insurance

contract

Except as otherwise provided in regulations prescribed by the

Secretary, in the case of any long-term care insurance coverage

(whether or not qualified) provided by a rider on or as part of a

life insurance contract -

(1) In general

This section shall apply as if the portion of the contract

providing such coverage is a separate contract.

(2) Application of section 7702

Section 7702(c)(2) (relating to the guideline premium

limitation) shall be applied by increasing the guideline premium

limitation with respect to a life insurance contract, as of any

date -

(A) by the sum of any charges (but not premium payments)

against the life insurance contract's cash surrender value

(within the meaning of section 7702(f)(2)(A)) for such coverage

made to that date under the contract, less

(B) any such charges the imposition of which reduces the

premiums paid for the contract (within the meaning of section

7702(f)(1)).

(3) Application of section 213

No deduction shall be allowed under section 213(a) for charges

against the life insurance contract's cash surrender value

described in paragraph (2), unless such charges are includible in

income as a result of the application of section 72(e)(10) and

the rider is a qualified long-term care insurance contract under

subsection (b).

(4) Portion defined

For purposes of this subsection, the term "portion" means only

the terms and benefits under a life insurance contract that are

in addition to the terms and benefits under the contract without

regard to long-term care insurance coverage.

(f) Treatment of certain State-maintained plans

(1) In general

If -

(A) an individual receives coverage for qualified long-term

care services under a State long-term care plan, and

(B) the terms of such plan would satisfy the requirements of

subsection (b) were such plan an insurance contract,

such plan shall be treated as a qualified long-term care

insurance contract for purposes of this title.

(2) State long-term care plan

For purposes of paragraph (1), the term "State long-term care

plan" means any plan -

(A) which is established and maintained by a State or an

instrumentality of a State,

(B) which provides coverage only for qualified long-term care

services, and

(C) under which such coverage is provided only to -

(i) employees and former employees of a State (or any

political subdivision or instrumentality of a State),

(ii) the spouses of such employees, and

(iii) individuals bearing a relationship to such employees

or spouses which is described in any of paragraphs (1)

through (8) of section 152(a).

(g) Consumer protection provisions

(1) In general

The requirements of this subsection are met with respect to any

contract if the contract meets -

(A) the requirements of the model regulation and model Act

described in paragraph (2),

(B) the disclosure requirement of paragraph (3), and

(C) the requirements relating to nonforfeitability under

paragraph (4).

(2) Requirements of model regulation and Act

(A) In general

The requirements of this paragraph are met with respect to

any contract if such contract meets -

(i) Model regulation

The following requirements of the model regulation:

(I) Section 7A (relating to guaranteed renewal or

noncancellability), and the requirements of section 6B of

the model Act relating to such section 7A.

(II) Section 7B (relating to prohibitions on limitations

and exclusions).

(III) Section 7C (relating to extension of benefits).

(IV) Section 7D (relating to continuation or conversion

of coverage).

(V) Section 7E (relating to discontinuance and

replacement of policies).

(VI) Section 8 (relating to unintentional lapse).

(VII) Section 9 (relating to disclosure), other than

section 9F thereof.

(VIII) Section 10 (relating to prohibitions against

post-claims underwriting).

(IX) Section 11 (relating to minimum standards).

(X) Section 12 (relating to requirement to offer

inflation protection), except that any requirement for a

signature on a rejection of inflation protection shall

permit the signature to be on an application or on a

separate form.

(XI) Section 23 (relating to prohibition against

preexisting conditions and probationary periods in

replacement policies or certificates).

(ii) Model Act

The following requirements of the model Act:

(I) Section 6C (relating to preexisting conditions).

(II) Section 6D (relating to prior hospitalization).

(B) Definitions

For purposes of this paragraph -

(i) Model provisions

The terms "model regulation" and "model Act" mean the

long-term care insurance model regulation, and the long-term

care insurance model Act, respectively, promulgated by the

National Association of Insurance Commissioners (as adopted

as of January 1993).

(ii) Coordination

Any provision of the model regulation or model Act listed

under clause (i) or (ii) of subparagraph (A) shall be treated

as including any other provision of such regulation or Act

necessary to implement the provision.

(iii) Determination

For purposes of this section and section 4980C, the

determination of whether any requirement of a model

regulation or the model Act has been met shall be made by the

Secretary.

(3) Disclosure requirement

The requirement of this paragraph is met with respect to any

contract if such contract meets the requirements of section

4980C(d).

(4) Nonforfeiture requirements

(A) In general

The requirements of this paragraph are met with respect to

any level premium contract, if the issuer of such contract

offers to the policyholder, including any group policyholder, a

nonforfeiture provision meeting the requirements of

subparagraph (B).

(B) Requirements of provision

The nonforfeiture provision required under subparagraph (A)

shall meet the following requirements:

(i) The nonforfeiture provision shall be appropriately

captioned.

(ii) The nonforfeiture provision shall provide for a

benefit available in the event of a default in the payment of

any premiums and the amount of the benefit may be adjusted

subsequent to being initially granted only as necessary to

reflect changes in claims, persistency, and interest as

reflected in changes in rates for premium paying contracts

approved by the appropriate State regulatory agency for the

same contract form.

(iii) The nonforfeiture provision shall provide at least

one of the following:

(I) Reduced paid-up insurance.

(II) Extended term insurance.

(III) Shortened benefit period.

(IV) Other similar offerings approved by the appropriate

State regulatory agency.

(5) Cross reference

For coordination of the requirements of this subsection with

State requirements, see section 4980C(f).

-SOURCE-

(Added and amended Pub. L. 104-191, title III, Secs. 321(a), 325,

Aug. 21, 1996, 110 Stat. 2054, 2063; Pub. L. 105-34, title XVI,

Sec. 1602(b), (e), Aug. 5, 1997, 111 Stat. 1094; Pub. L. 105-206,

title VI, Sec. 6023(28), July 22, 1998, 112 Stat. 826.)

-STATAMEND-

ADJUSTMENT OF DOLLAR AMOUNT OF PER DIEM LIMITATION REGARDING

PERIODIC PAYMENTS FOR CALENDAR YEAR 2003

For adjustment of dollar amount of per diem limitation on

periodic payments received under qualified long-term care or

certain life insurance contracts under subsection (d)(4) of this

section for calendar year 2003, see section 3.33 of Revenue

Procedure 2002-70, set out as a note under section 1 of this title.

-REFTEXT-

REFERENCES IN TEXT

The Social Security Act, referred to in subsec. (b)(1)(B),

(2)(B)(i), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended.

Title XVIII of the Act is classified generally to subchapter XVIII

(Sec. 1395 et seq.) of chapter 7 of Title 42, The Public Health and

Welfare. Section 1861(r)(1) of the Act is classified to section

1395x(r)(1) of Title 42. For complete classification of this Act to

the Code, see section 1305 of Title 42 and Tables.

-MISC1-

AMENDMENTS

1998 - Subsec. (e)(2). Pub. L. 105-206 inserted "section" after

"Application of" in heading.

1997 - Subsec. (c)(2)(B). Pub. L. 105-34, Sec. 1602(b), inserted

"described in subparagraph (A)(i)" after "chronically ill

individual" in concluding provisions.

Subsec. (g)(4)(B)(ii), (iii)(IV). Pub. L. 105-34, Sec. 1602(e),

substituted "appropriate State regulatory agency" for "Secretary".

1996 - Subsec. (g). Pub. L. 104-191, Sec. 325, added subsec. (g).

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by 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 AMENDMENT

Amendment by section 325 of Pub. L. 104-191 applicable to

contracts issued after Dec. 31, 1996, with provisions of section

321(f) of Pub. L. 104-191, set out as an Effective Date note below,

applicable to such contracts, see section 327 of Pub. L. 104-191,

set out as an Effective Date note under section 4980C of this

title.

EFFECTIVE DATE

Section 321(f) of Pub. L. 104-191 provided that:

"(1) General effective date. -

"(A) In general. - Except as provided in subparagraph (B), the

amendments made by this section [enacting this section and

amending sections 106, 125, 807, and 4980B of this title, section

1167 of Title 29, Labor, and section 300bb-8 of Title 42, The

Public Health and Welfare] shall apply to contracts issued after

December 31, 1996.

"(B) Reserve method. - The amendment made by subsection (b)

[amending section 807 of this title] shall apply to contracts

issued after December 31, 1997.

"(2) Continuation of existing policies. - In the case of any

contract issued before January 1, 1997, which met the long-term

care insurance requirements of the State in which the contract was

sitused [sic] at the time the contract was issued -

"(A) such contract shall be treated for purposes of the

Internal Revenue Code of 1986 as a qualified long-term care

insurance contract (as defined in section 7702B(b) of such Code),

and

"(B) services provided under, or reimbursed by, such contract

shall be treated for such purposes as qualified long-term care

services (as defined in section 7702B(c) of such Code).

In the case of an individual who is covered on December 31, 1996,

under a State long-term care plan (as defined in section

7702B(f)(2) of such Code), the terms of such plan on such date

shall be treated for purposes of the preceding sentence as a

contract issued on such date which met the long-term care insurance

requirements of such State.

"(3) Exchanges of existing policies. - If, after the date of

enactment of this Act [Aug. 21, 1996] and before January 1, 1998, a

contract providing for long-term care insurance coverage is

exchanged solely for a qualified long-term care insurance contract

(as defined in section 7702B(b) of such Code), no gain or loss

shall be recognized on the exchange. If, in addition to a qualified

long-term care insurance contract, money or other property is

received in the exchange, then any gain shall be recognized to the

extent of the sum of the money and the fair market value of the

other property received. For purposes of this paragraph, the

cancellation of a contract providing for long-term care insurance

coverage and reinvestment of the cancellation proceeds in a

qualified long-term care insurance contract within 60 days

thereafter shall be treated as an exchange.

"(4) Issuance of certain riders permitted. - For purposes of

applying sections 101(f), 7702, and 7702A of the Internal Revenue

Code of 1986 to any contract -

"(A) the issuance of a rider which is treated as a qualified

long-term care insurance contract under section 7702B, and

"(B) the addition of any provision required to conform any

other long-term care rider to be so treated,

shall not be treated as a modification or material change of such

contract.

"(5) Application of per diem limitation to existing contracts. -

The amount of per diem payments made under a contract issued on or

before July 31, 1996, with respect to an insured which are

excludable from gross income by reason of section 7702B of the

Internal Revenue Code of 1986 (as added by this section) shall not

be reduced under subsection (d)(2)(B) thereof by reason of

reimbursements received under a contract issued on or before such

date. The preceding sentence shall cease to apply as of the date

(after July 31, 1996) such contract is exchanged or there is any

contract modification which results in an increase in the amount of

such per diem payments or the amount of such reimbursements."

LONG-TERM CARE STUDY REQUEST

Section 321(g) of Pub. L. 104-191 provided that: "The Chairman of

the Committee on Ways and Means of the House of Representatives and

the Chairman of the Committee on Finance of the Senate shall

jointly request the National Association of Insurance

Commissioners, in consultation with representatives of the

insurance industry and consumer organizations, to formulate,

develop, and conduct a study to determine the marketing and other

effects of per diem limits on certain types of long-term care

policies. If the National Association of Insurance Commissioners

agrees to the study request, the National Association of Insurance

Commissioners shall report the results of its study to such

committees not later than 2 years after accepting the request."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 101, 106, 162, 213, 220,

807, 818, 4980B, 4980C of this title; title 5 sections 9001, 9002;

title 12 section 1715z-20; title 29 section 1167; title 42 section

300bb-8.

-End-

-CITE-

26 USC Sec. 7703 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7703. Determination of marital status

-STATUTE-

(a) General rule

For purposes of part V of subchapter B of chapter 1 and those

provisions of this title which refer to this subsection -

(1) the determination of whether an individual is married shall

be made as of the close of his taxable year; except that if his

spouse dies during his taxable year such determination shall be

made as of the time of such death; and

(2) an individual legally separated from his spouse under a

decree of divorce or of separate maintenance shall not be

considered as married.

(b) Certain married individuals living apart

For purposes of those provisions of this title which refer to

this subsection, if -

(1) an individual who is married (within the meaning of

subsection (a)) and who files a separate return maintains as his

home a household which constitutes for more than one-half of the

taxable year the principal place of abode of a child (within the

meaning of section 151(c)(3)) with respect to whom such

individual is entitled to a deduction for the taxable year under

section 151 (or would be so entitled but for paragraph (2) or (4)

of section 152(e)),

(2) such individual furnishes over one-half of the cost of

maintaining such household during the taxable year, and

(3) during the last 6 months of the taxable year, such

individual's spouse is not a member of such household,

such individual shall not be considered as married.

-SOURCE-

(Added Pub. L. 99-514, title XIII, Sec. 1301(j)(2)(A), Oct. 22,

1986, 100 Stat. 2657; amended Pub. L. 100-647, title I, Sec.

1018(u)(41), Nov. 10, 1988, 102 Stat. 3592.)

-MISC1-

PRIOR PROVISIONS

Provisions relating to determination of marital status were

formerly contained in section 143 of this title, prior to enactment

of this section by Pub. L. 99-514.

AMENDMENTS

1988 - Subsec. (b)(1). Pub. L. 100-647 substituted "section

151(c)(3)" for "section 151(e)(3)".

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

Section applicable to bonds issued after Aug. 15, 1986, except as

otherwise provided, see sections 1311 to 1318 of Pub. L. 99-514,

set out as an Effective Date; Transitional Rules note under section

141 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1, 2, 22, 24, 25A, 32,

55, 62, 63, 68, 86, 135, 151, 152, 153, 194, 221, 222, 879, 1044,

1202, 1398, 3402, 6012, 6103, 6654 of this title; title 38 section

1503.

-End-

-CITE-

26 USC Sec. 7704 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle F - Procedure and Administration

CHAPTER 79 - DEFINITIONS

-HEAD-

Sec. 7704. Certain publicly traded partnerships treated as

corporations

-STATUTE-

(a) General rule

For purposes of this title, except as provided in subsection (c),

a publicly traded partnership shall be treated as a corporation.

(b) Publicly traded partnership

For purposes of this section, the term "publicly traded

partnership" means any partnership if -

(1) interests in such partnership are traded on an established

securities market, or

(2) interests in such partnership are readily tradable on a

secondary market (or the substantial equivalent thereof).

(c) Exception for partnerships with passive-type income

(1) In general

Subsection (a) shall not apply to any publicly traded

partnership for any taxable year if such partnership met the

gross income requirements of paragraph (2) for such taxable year

and each preceding taxable year beginning after December 31,

1987, during which the partnership (or any predecessor) was in

existence. For purposes of the preceding sentence, a partnership

shall not be treated as being in existence during any period

before the 1st taxable year in which such partnership (or a

predecessor) was a publicly traded partnership.

(2) Gross income requirements

A partnership meets the gross income requirements of this

paragraph for any taxable year if 90 percent or more of the gross

income of such partnership for such taxable year consists of

qualifying income.

(3) Exception not to apply to certain partnerships which could

qualify as regulated investment companies

This subsection shall not apply to any partnership which would

be described in section 851(a) if such partnership were a

domestic corporation. To the extent provided in regulations, the

preceding sentence shall not apply to any partnership a principal

activity of which is the buying and selling of commodities (not

described in section 1221(a)(1)), or options, futures, or

forwards with respect to commodities.

(d) Qualifying income

For purposes of this section -

(1) In general

Except as otherwise provided in this subsection, the term

"qualifying income" means -

(A) interest,

(B) dividends,

(C) real property rents,

(D) gain from the sale or other disposition of real property

(including property described in section 1221(a)(1)),

(E) income and gains derived from the exploration,

development, mining or production, processing, refining,

transportation (including pipelines transporting gas, oil, or

products thereof), or the marketing of any mineral or natural

resource (including fertilizer, geothermal energy, and timber),

(F) any gain from the sale or disposition of a capital asset

(or property described in section 1231(b)) held for the

production of income described in any of the foregoing

subparagraphs of this paragraph, and

(G) in the case of a partnership described in the second

sentence of subsection (c)(3), income and gains from

commodities (not described in section 1221(a)(1)) or futures,

forwards, and options with respect to commodities.

For purposes of subparagraph (E), the term "mineral or natural

resource" means any product of a character with respect to which

a deduction for depletion is allowable under section 611; except

that such term shall not include any product described in

subparagraph (A) or (B) of section 613(b)(7).

(2) Certain interest not qualified

Interest shall not be treated as qualifying income if -

(A) such interest is derived in the conduct of a financial or

insurance business, or

(B) such interest would be excluded from the term "interest"

under section 856(f).

(3) Real property rent

The term "real property rent" means amounts which would qualify

as rent from real property under section 856(d) if -

(A) such section were applied without regard to paragraph

(2)(C) thereof (relating to independent contractor

requirements), and

(B) stock owned, directly or indirectly, by or for a partner

would not be considered as owned under section 318(a)(3)(A) by

the partnership unless 5 percent or more (by value) of the

interests in such partnership are owned, directly or

indirectly, by or for such partner.

(4) Certain income qualifying under regulated investment company

or real estate trust provisions

The term "qualifying income" also includes any income which

would qualify under section 851(b)(2) or 856(c)(2).

(5) Special rule for determining gross income from certain real

property sales

In the case of the sale or other disposition of real property

described in section 1221(a)(1), gross income shall not be

reduced by inventory costs.

(e) Inadvertent terminations

If -

(1) a partnership fails to meet the gross income requirements

of subsection (c)(2),

(2) the Secretary determines that such failure was inadvertent,

(3) no later than a reasonable time after the discovery of such

failure, steps are taken so that such partnership once more meets

such gross income requirements, and

(4) such partnership agrees to make such adjustments (including

adjustments with respect to the partners) or to pay such amounts

as may be required by the Secretary with respect to such period,

then, notwithstanding such failure, such entity shall be treated as

continuing to meet such gross income requirements for such period.

(f) Effect of becoming corporation

As of the 1st day that a partnership is treated as a corporation

under this section, for purposes of this title, such partnership

shall be treated as -

(1) transferring all of its assets (subject to its liabilities)

to a newly formed corporation in exchange for the stock of the

corporation, and

(2) distributing such stock to its partners in liquidation of

their interests in the partnership.

(g) Exception for electing 1987 partnerships

(1) In general

Subsection (a) shall not apply to an electing 1987 partnership.

(2) Electing 1987 partnership

For purposes of this subsection, the term "electing 1987

partnership" means any publicly traded partnership if -

(A) such partnership is an existing partnership (as defined

in section 10211(c)(2) of the Revenue Reconciliation Act of

1987),

(B) subsection (a) has not applied (and without regard to

subsection (c)(1) would not have applied) to such partnership

for all prior taxable years beginning after December 31, 1987,

and before January 1, 1998, and

(C) such partnership elects the application of this

subsection, and consents to the application of the tax imposed

by paragraph (3), for its first taxable year beginning after

December 31, 1997.

A partnership which, but for this sentence, would be treated as

an electing 1987 partnership shall cease to be so treated (and

the election under subparagraph (C) shall cease to be in effect)

as of the 1st day after December 31, 1997, on which there has

been an addition of a substantial new line of business with

respect to such partnership.

(3) Additional tax on electing partnerships

(A) Imposition of tax

There is hereby imposed for each taxable year on the income

of each electing 1987 partnership a tax equal to 3.5 percent of

such partnership's gross income for the taxable year from the

active conduct of trades and businesses by the partnership.

(B) Adjustments in the case of tiered partnerships

For purposes of this paragraph, in the case of a partnership

which is a partner in another partnership, the gross income

referred to in subparagraph (A) shall include the partnership's

distributive share of the gross income of such other

partnership from the active conduct of trades and businesses of

such other partnership. A similar rule shall apply in the case

of lower-tiered partnerships.

(C) Treatment of tax

For purposes of this title, the tax imposed by this paragraph

shall be treated as imposed by chapter 1 other than for

purposes of determining the amount of any credit allowable

under chapter 1 and shall be paid by the partnership. Section

6655 shall be applied to such partnership with respect to such

tax in the same manner as if the partnership were a

corporation, such tax were imposed by section 11, and

references in such section to taxable income were references to

the gross income referred to in subparagraph (A).

(4) Election

An election and consent under this subsection shall apply to

the taxable year for which made and all subsequent taxable years

unless revoked by the partnership. Such revocation may be made

without the consent of the Secretary, but, once so revoked, may

not be reinstated.

-SOURCE-

(Added Pub. L. 100-203, title X, Sec. 10211(a), Dec. 22, 1987, 101

Stat. 1330-403; amended Pub. L. 100-647, title II, Sec. 2004(f)(1),

(3)-(5), Nov. 10, 1988, 102 Stat. 3602, 3603; Pub. L. 105-34, title

IX, Sec. 964(a), Aug. 5, 1997, 111 Stat. 892; Pub. L. 105-206,

title VI, Sec. 6009(b)(1), July 22, 1998, 112 Stat. 812; Pub. L.

106-170, title V, Sec. 532(c)(2)(V)-(Y), Dec. 17, 1999, 113 Stat.

1931.)

-REFTEXT-

REFERENCES IN TEXT

Section 10211(c)(2) of the Revenue Reconciliation Act of 1987,

referred to in subsec. (g)(2)(A), probably means section

10211(c)(2) of the Revenue Act of 1987, title X of Pub. L. 100-203,

which is set out as a note below.

-MISC1-

AMENDMENTS

1999 - Subsecs. (c)(3), (d)(1)(D), (G), (5). Pub. L. 106-170

substituted "section 1221(a)(1)" for "section 1221(1)".

1998 - Subsec. (g)(3)(C). Pub. L. 105-206 inserted at end "and

shall be paid by the partnership. Section 6655 shall be applied to

such partnership with respect to such tax in the same manner as if

the partnership were a corporation, such tax were imposed by

section 11, and references in such section to taxable income were

references to the gross income referred to in subparagraph (A)".

1997 - Subsec. (g). Pub. L. 105-34 added subsec. (g).

1988 - Subsec. (c)(1). Pub. L. 100-647, Sec. 2004(f)(3), inserted

at end "For purposes of the preceding sentence, a partnership shall

not be treated as being in existence during any period before the

1st taxable year in which such partnership (or a predecessor) was a

publicly traded partnership."

Subsec. (d)(1). Pub. L. 100-647, Sec. 2004(f)(4), inserted at end

"For purposes of subparagraph (E), the term 'mineral or natural

resource' means any product of a character with respect to which a

deduction for depletion is allowable under section 611; except that

such term shall not include any product described in subparagraph

(A) or (B) of section 613(b)(7)."

Subsec. (d)(3). Pub. L. 100-647, Sec. 2004(f)(5), amended par.

(3) generally. Prior to amendment, par. (3) read as follows: "The

term 'real property rent' means amounts which would qualify as rent

from real property under section 856(d) if such section were

applied without regard to paragraph (2)(C) thereof (relating to

independent contractor requirements)."

Subsec. (e)(4). Pub. L. 100-647, Sec. 2004(f)(1), inserted "or to

pay such amounts" before "as may be required".

EFFECTIVE DATE OF 1999 AMENDMENT

Amendment by Pub. L. 106-170 applicable to any instrument held,

acquired, or entered into, any transaction entered into, and

supplies held or acquired on or after Dec. 17, 1999, see section

532(d) of Pub. L. 106-170, set out as a note under section 170 of

this title.

EFFECTIVE DATE OF 1998 AMENDMENT

Pub. L. 105-206, title VI, Sec. 6009(b)(2), July 22, 1998, 112

Stat. 812, provided that: "The second sentence of section

7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) shall

apply to taxable years beginning after the date of the enactment of

this Act [July 22, 1998]."

EFFECTIVE DATE OF 1997 AMENDMENT

Section 964(b) of Pub. L. 105-34 provided that: "The amendment

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

years beginning after December 31, 1997."

EFFECTIVE DATE OF 1988 AMENDMENT

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

provided, as if included in the provisions of the Revenue Act of

1987, Pub. L. 100-203, title X, to which such amendment relates,

see section 2004(u) of Pub. L. 100-647, set out as a note under

section 56 of this title.

EFFECTIVE DATE

Section 10211(c) of Pub. L. 100-203, as amended by Pub. L.

100-647, title II, Sec. 2004(f)(2), Nov. 10, 1988, 102 Stat. 3602,

provided that:

"(1) In general. - The amendments made by this section [enacting

this section] shall apply -

"(A) except as provided in subparagraph (B), to taxable years

beginning after December 31, 1987, or

"(B) in the case of an existing partnership, to taxable years

beginning after December 31, 1997.

"(2) Existing partnership. - For purposes of this subsection -

"(A) In general. - The term 'existing partnership' means any

partnership if -

"(i) such partnership was a publicly traded partnership on

December 17, 1987,

"(ii) a registration statement indicating that such

partnership was to be a publicly traded partnership was filed

with the Securities and Exchange Commission with respect to

such partnership on or before such date, or

"(iii) with respect to such partnership, an application was

filed with a State regulatory commission on or before such date

seeking permission to restructure a portion of a corporation as

a publicly traded partnership.

"(B) Special rule where substantial new line of business added

after december 17, 1987. - A partnership which, but for this

subparagraph, would be treated as an existing partnership shall

cease to be treated as an existing partnership as of the 1st day

after December 17, 1987, on which there has been an addition of a

substantial new line of business with respect to such

partnership.

"(C) Coordination with passive-type income requirements. - In

the case of an existing partnership, paragraph (1) of section

7704(c) of the Internal Revenue Code of 1986 (as added by this

section) shall be applied by substituting for 'December 31, 1987'

the earlier of -

"(i) December 31, 1997, or

"(ii) the day (if any) as of which such partnership ceases to

be treated as an existing partnership by reason of subparagraph

(B)."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 351, 475, 988 of this

title; title 29 section 1107.

-End-