US (United States) Code. Title26. SubtitleA: Income Taxes. Chapter 1: Normal taxes and surtaxes

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

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26 USC Sec. 45E 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart D - Business Related Credits

-HEAD-

Sec. 45E. Small employer pension plan startup costs

-STATUTE-

(a) General rule

For purposes of section 38, in the case of an eligible employer,

the small employer pension plan startup cost credit determined

under this section for any taxable year is an amount equal to 50

percent of the qualified startup costs paid or incurred by the

taxpayer during the taxable year.

(b) Dollar limitation

The amount of the credit determined under this section for any

taxable year shall not exceed -

(1) $500 for the first credit year and each of the 2 taxable

years immediately following the first credit year, and

(2) zero for any other taxable year.

(c) Eligible employer

For purposes of this section -

(1) In general

The term "eligible employer" has the meaning given such term by

section 408(p)(2)(C)(i).

(2) Requirement for new qualified employer plans

Such term shall not include an employer if, during the

3-taxable year period immediately preceding the 1st taxable year

for which the credit under this section is otherwise allowable

for a qualified employer plan of the employer, the employer or

any member of any controlled group including the employer (or any

predecessor of either) established or maintained a qualified

employer plan with respect to which contributions were made, or

benefits were accrued, for substantially the same employees as

are in the qualified employer plan.

(d) Other definitions

For purposes of this section -

(1) Qualified startup costs

(A) In general

The term "qualified startup costs" means any ordinary and

necessary expenses of an eligible employer which are paid or

incurred in connection with -

(i) the establishment or administration of an eligible

employer plan, or

(ii) the retirement-related education of employees with

respect to such plan.

(B) Plan must have at least 1 participant

Such term shall not include any expense in connection with a

plan that does not have at least 1 employee eligible to

participate who is not a highly compensated employee.

(2) Eligible employer plan

The term "eligible employer plan" means a qualified employer

plan within the meaning of section 4972(d).

(3) First credit year

The term "first credit year" means -

(A) the taxable year which includes the date that the

eligible employer plan to which such costs relate becomes

effective, or

(B) at the election of the eligible employer, the taxable

year preceding the taxable year referred to in subparagraph

(A).

(e) Special rules

For purposes of this section -

(1) Aggregation rules

All persons treated as a single employer under subsection (a)

or (b) of section 52, or subsection (m) or (o) of section 414,

shall be treated as one person. All eligible employer plans shall

be treated as 1 eligible employer plan.

(2) Disallowance of deduction

No deduction shall be allowed for that portion of the qualified

startup costs paid or incurred for the taxable year which is

equal to the credit determined under subsection (a).

(3) Election not to claim credit

This section shall not apply to a taxpayer for any taxable year

if such taxpayer elects to have this section not apply for such

taxable year.

-SOURCE-

(Added Pub. L. 107-16, title VI, Sec. 619(a), June 7, 2001, 115

Stat. 108; amended Pub. L. 107-147, title IV, Sec. 411(n)(1), Mar.

9, 2002, 116 Stat. 48.)

-STATAMEND-

TERMINATION OF SECTION

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

Effective and Termination Dates note below.

-MISC1-

AMENDMENTS

2002 - Subsec. (e)(1). Pub. L. 107-147 substituted "subsection

(m)" for "subsection (n)".

EFFECTIVE DATE OF 2002 AMENDMENT

Amendment by Pub. L. 107-147 effective as if included in the

provisions of the Economic Growth and Tax Relief Reconciliation Act

of 2001, Pub. L. 107-16, to which such amendment relates, see

section 411(x) of Pub. L. 107-147, set out as a note under section

25B of this title.

EFFECTIVE AND TERMINATION DATES

Section applicable to costs paid or incurred in taxable years

beginning after Dec. 31, 2001, with respect to qualified employer

plans first effective after such date, see section 619(d) of Pub.

L. 107-16, as amended, set out as an Effective and Termination

Dates of 2001 Amendment note under section 38 of this title.

Section inapplicable to taxable, plan, or limitation years

beginning after Dec. 31, 2010, and the Internal Revenue Code of

1986 to be applied and administered to such years as if it had

never been enacted, see section 901 of Pub. L. 107-16, set out as

an Effective and Termination Dates of 2001 Amendment note under

section 1 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 38, 39, 196 of this

title.

-End-

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26 USC Sec. 45F 01/06/03

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TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart D - Business Related Credits

-HEAD-

Sec. 45F. Employer-provided child care credit

-STATUTE-

(a) In general

For purposes of section 38, the employer-provided child care

credit determined under this section for the taxable year is an

amount equal to the sum of -

(1) 25 percent of the qualified child care expenditures, and

(2) 10 percent of the qualified child care resource and

referral expenditures,

of the taxpayer for such taxable year.

(b) Dollar limitation

The credit allowable under subsection (a) for any taxable year

shall not exceed $150,000.

(c) Definitions

For purposes of this section -

(1) Qualified child care expenditure

(A) In general

The term "qualified child care expenditure" means any amount

paid or incurred -

(i) to acquire, construct, rehabilitate, or expand property

-

(I) which is to be used as part of a qualified child care

facility of the taxpayer,

(II) with respect to which a deduction for depreciation

(or amortization in lieu of depreciation) is allowable, and

(III) which does not constitute part of the principal

residence (within the meaning of section 121) of the

taxpayer or any employee of the taxpayer,

(ii) for the operating costs of a qualified child care

facility of the taxpayer, including costs related to the

training of employees, to scholarship programs, and to the

providing of increased compensation to employees with higher

levels of child care training, or

(iii) under a contract with a qualified child care facility

to provide child care services to employees of the taxpayer.

(B) Fair market value

The term "qualified child care expenditures" shall not

include expenses in excess of the fair market value of such

care.

(2) Qualified child care facility

(A) In general

The term "qualified child care facility" means a facility -

(i) the principal use of which is to provide child care

assistance, and

(ii) which meets the requirements of all applicable laws

and regulations of the State or local government in which it

is located, including the licensing of the facility as a

child care facility.

Clause (i) shall not apply to a facility which is the principal

residence (within the meaning of section 121) of the operator

of the facility.

(B) Special rules with respect to a taxpayer

A facility shall not be treated as a qualified child care

facility with respect to a taxpayer unless -

(i) enrollment in the facility is open to employees of the

taxpayer during the taxable year,

(ii) if the facility is the principal trade or business of

the taxpayer, at least 30 percent of the enrollees of such

facility are dependents of employees of the taxpayer, and

(iii) the use of such facility (or the eligibility to use

such facility) does not discriminate in favor of employees of

the taxpayer who are highly compensated employees (within the

meaning of section 414(q)).

(3) Qualified child care resource and referral expenditure

(A) In general

The term "qualified child care resource and referral

expenditure" means any amount paid or incurred under a contract

to provide child care resource and referral services to an

employee of the taxpayer.

(B) Nondiscrimination

The services shall not be treated as qualified unless the

provision of such services (or the eligibility to use such

services) does not discriminate in favor of employees of the

taxpayer who are highly compensated employees (within the

meaning of section 414(q)).

(d) Recapture of acquisition and construction credit

(1) In general

If, as of the close of any taxable year, there is a recapture

event with respect to any qualified child care facility of the

taxpayer, then the tax of the taxpayer under this chapter for

such taxable year shall be increased by an amount equal to the

product of -

(A) the applicable recapture percentage, and

(B) the aggregate decrease in the credits allowed under

section 38 for all prior taxable years which would have

resulted if the qualified child care expenditures of the

taxpayer described in subsection (c)(1)(A) with respect to such

facility had been zero.

(2) Applicable recapture percentage

(A) In general

For purposes of this subsection, the applicable recapture

percentage shall be determined from the following table:

The applicable

If the recapture event recapture

occurs in: percentage is:

Years 1-3 100

Year 4 85

Year 5 70

Year 6 55

Year 7 40

Year 8 25

Years 9 and 10 10

Years 11 and thereafter 0.

(B) Years

For purposes of subparagraph (A), year 1 shall begin on the

first day of the taxable year in which the qualified child care

facility is placed in service by the taxpayer.

(3) Recapture event defined

For purposes of this subsection, the term "recapture event"

means -

(A) Cessation of operation

The cessation of the operation of the facility as a qualified

child care facility.

(B) Change in ownership

(i) In general

Except as provided in clause (ii), the disposition of a

taxpayer's interest in a qualified child care facility with

respect to which the credit described in subsection (a) was

allowable.

(ii) Agreement to assume recapture liability

Clause (i) shall not apply if the person acquiring such

interest in the facility agrees in writing to assume the

recapture liability of the person disposing of such interest

in effect immediately before such disposition. In the event

of such an assumption, the person acquiring the interest in

the facility shall be treated as the taxpayer for purposes of

assessing any recapture liability (computed as if there had

been no change in ownership).

(4) Special rules

(A) Tax benefit rule

The tax for the taxable year shall be increased under

paragraph (1) only with respect to credits allowed by reason of

this section which were used to reduce tax liability. In the

case of credits not so used to reduce tax liability, the

carryforwards and carrybacks under section 39 shall be

appropriately adjusted.

(B) No credits against tax

Any increase in tax under this subsection shall not be

treated as a tax imposed by this chapter for purposes of

determining the amount of any credit under this chapter or for

purposes of section 55.

(C) No recapture by reason of casualty loss

The increase in tax under this subsection shall not apply to

a cessation of operation of the facility as a qualified child

care facility by reason of a casualty loss to the extent such

loss is restored by reconstruction or replacement within a

reasonable period established by the Secretary.

(e) Special rules

For purposes of this section -

(1) Aggregation rules

All persons which are treated as a single employer under

subsections (a) and (b) of section 52 shall be treated as a

single taxpayer.

(2) Pass-thru in the case of estates and trusts

Under regulations prescribed by the Secretary, rules similar to

the rules of subsection (d) of section 52 shall apply.

(3) Allocation in the case of partnerships

In the case of partnerships, the credit shall be allocated

among partners under regulations prescribed by the Secretary.

(f) No double benefit

(1) Reduction in basis

For purposes of this subtitle -

(A) In general

If a credit is determined under this section with respect to

any property by reason of expenditures described in subsection

(c)(1)(A), the basis of such property shall be reduced by the

amount of the credit so determined.

(B) Certain dispositions

If, during any taxable year, there is a recapture amount

determined with respect to any property the basis of which was

reduced under subparagraph (A), the basis of such property

(immediately before the event resulting in such recapture)

shall be increased by an amount equal to such recapture amount.

For purposes of the preceding sentence, the term "recapture

amount" means any increase in tax (or adjustment in carrybacks

or carryovers) determined under subsection (d).

(2) Other deductions and credits

No deduction or credit shall be allowed under any other

provision of this chapter with respect to the amount of the

credit determined under this section.

-SOURCE-

(Added Pub. L. 107-16, title II, Sec. 205(a), June 7, 2001, 115

Stat. 50; amended Pub. L. 107-147, title IV, Sec. 411(d)(1), Mar.

9, 2002, 116 Stat. 46.)

-STATAMEND-

TERMINATION OF SECTION

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

Effective and Termination Dates note below.

-MISC1-

AMENDMENTS

2002 - Subsec. (d)(4)(B). Pub. L. 107-147 substituted "this

chapter or for purposes of section 55" for "subpart A, B, or D of

this part".

EFFECTIVE DATE OF 2002 AMENDMENT

Amendment by Pub. L. 107-147 effective as if included in the

provisions of the Economic Growth and Tax Relief Reconciliation Act

of 2001, Pub. L. 107-16, to which such amendment relates, see

section 411(x) of Pub. L. 107-147, set out as a note under section

25B of this title.

EFFECTIVE AND TERMINATION DATES

Section applicable to taxable years beginning after Dec. 31,

2001, see section 205(c) of Pub. L. 107-16, set out as an Effective

and Termination Dates of 2001 Amendment note under section 38 of

this title.

Section inapplicable to taxable, plan, or limitation years

beginning after Dec. 31, 2010, and the Internal Revenue Code of

1986 to be applied and administered to such years as if it had

never been enacted, see section 901 of Pub. L. 107-16, set out as

an Effective and Termination Dates of 2001 Amendment note under

section 1 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 38, 1016 of this title.

-End-

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26 USC Subpart E - Rules for Computing Investment Credit 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

SUBPART E - RULES FOR COMPUTING INVESTMENT CREDIT

-MISC1-

Sec.

46. Amount of credit.

47. Rehabilitation credit.

48. Energy credit; reforestation credit.

49. At-risk rules.

50. Other special rules.

AMENDMENTS

1990 - Pub. L. 101-508, title XI, Sec. 11813(a), Nov. 5, 1990,

104 Stat. 1388-536, amended heading and analysis generally,

substituting in heading "Investment Credit" for "Credit for

Investment in Certain Depreciable Property", in item 47

"Rehabilitation Credit" for "Certain dispositions, etc., of section

38 property", in item 48 "Energy credit; reforestation credit" for

"Definitions; special rules", in item 49 "At-risk rules" for

"Termination of regular percentage", and adding item 50.

1986 - Pub. L. 99-514, title II, Sec. 211(c), Oct. 22, 1986, 100

Stat. 2168, added item 49.

1984 - Pub. L. 98-369, div. A, title IV, Sec. 474(n)(1), July 18,

1984, 98 Stat. 833, substituted "E" for "B" as subpart designation.

1978 - Pub. L. 95-600, title III, Sec. 312(c)(5), Nov. 6, 1978,

92 Stat. 2826, struck out item 49 "Termination for period beginning

April 19, 1969, and ending during 1971" and item 50 "Restoration of

credit".

1971 - Pub. L. 92-178, title I, Sec. 101(b)(5), Dec. 10, 1971, 85

Stat. 499, substituted "Termination for period beginning April 19,

1969, and ending during 1971" for "Termination of credit" in item

49 and added item 50.

1969 - Pub. L. 91-172, title VII, Sec. 703(d), Dec. 30, 1969, 83

Stat. 667, added item 49.

1962 - Pub. L. 87-834, Sec. 2(b), Oct. 16, 1962, 76 Stat. 963,

added subpart B.

-SECREF-

SUBPART REFERRED TO IN OTHER SECTIONS

This subpart is referred to in section 53 of this title.

-End-

-CITE-

26 USC Sec. 46 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

Sec. 46. Amount of credit

-STATUTE-

For purposes of section 38, the amount of the investment credit

determined under this section for any taxable year shall be the sum

of -

(1) the rehabilitation credit,

(2) the energy credit, and

(3) the reforestation credit.

-SOURCE-

(Added Pub. L. 87-834, Sec. 2(b), Oct. 16, 1962, 76 Stat. 963;

amended Pub. L. 88-272, title II, Sec. 201(d)(4), Feb. 26, 1964, 78

Stat. 32; Pub. L. 89-384, Sec. 1(c)(1), Apr. 8, 1966, 80 Stat. 102;

Pub. L. 89-389, Sec. 2(b)(5), Apr. 14, 1966, 80 Stat. 114; Pub. L.

89-800, Sec. 3, Nov. 8, 1966, 80 Stat. 1514; Pub. L. 90-225, Sec.

2(a), Dec. 27, 1967, 81 Stat. 731; Pub. L. 91-172, title III, Sec.

301(b)(4), title IV, Sec. 401(e)(1), title VII, Sec. 703(b), Dec.

30, 1969, 83 Stat. 585, 603, 666; Pub. L. 92-178, title I, Secs.

102(a)(1), (b), 105(a)-(c), 106(a)-(c), 107(a)(1), 108(a), Dec. 10,

1971, 85 Stat. 499, 503, 506, 507; Pub. L. 93-406, title II, Secs.

2001(g)(2)(B), 2002(g)(2), 2005(c)(4), Sept. 2, 1974, 88 Stat. 957,

968, 991; Pub. L. 94-12, title III, Sec. 301(a), (b)(1)-(3),

302(a), (b)(1), Mar. 29, 1975, 89 Stat. 36, 37, 40, 43; Pub. L.

94-455, title V, Sec. 503(b)(4), title VIII, Secs. 802(a),

(b)(1)-(5), 803(a), (b)(1), 805(a), title XVI, Sec. 1607(b)(1)(B),

title XVII, Secs. 1701(b), 1703, title XIX, Secs. 1901(a)(4),

(b)(1)(C), 1906(b)(13)(A), title XXI, Sec. 2112(a)(2), Oct. 4,

1976, 90 Stat. 1562, 1580-1583, 1596, 1756, 1759, 1761, 1764, 1790,

1834, 1905; Pub. L. 95-600, title I, Sec. 141(e), (f)(2), title

III, Secs. 311(a), (c), 312(a), (b), (c)(2), 313(a), 316(a),

(b)(1), (2), title VII, Sec. 703(a)(1), (2), (j)(9), Nov. 6, 1978,

92 Stat. 2794, 2795, 2824-2826, 2829, 2939, 2941; Pub. L. 95-618,

title II, Sec. 241(a), title III, Sec. 301(a), (c)(1), Nov. 9,

1978, 92 Stat. 3192, 3194, 3199; Pub. L. 96-222, title I, Secs.

101(a)(7)(A), (L)(iii)(I), (v)(I), (M)(i), 103(a)(2)(A),

(B)(i)-(iii), (3), (4)(A), 107(a)(3)(A), Apr. 1, 1980, 94 Stat.

197, 200, 201, 208, 209, 223; Pub. L. 96-223, title II, Secs.

221(a), 222(e)(2), 223(b)(1), Apr. 2, 1980, 94 Stat. 260, 263, 266;

Pub. L. 97-34, title II, Secs. 207(c)(1), 211(a)(1), (b), (d),

(e)(1), (2), (f)(1), 212(a)(1), (2), title III, Secs. 302(c)(3),

(d)(1), 332(a), Aug. 13, 1981, 95 Stat. 225, 227-229, 235, 236,

272, 274, 296; Pub. L. 97-248, title II, Sec. 201(d)(8)(A),

formerly Sec. 201(c)(8)(A), Secs. 205(b), 265(b)(2)(A)(i), Sept. 3,

1982, 96 Stat. 420, 430, 547, renumbered Sec. 201(d)(8)(A), Pub. L.

97-448, title III, Sec. 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat.

2400; Pub. L. 97-354, Sec. 5(a)(4)-(6), Oct. 19, 1982, 96 Stat.

1692; Pub. L. 97-424, title V, Secs. 541(b), 546(b), Jan. 6, 1983,

96 Stat. 2192, 2199; Pub. L. 97-448, title I, Sec. 102(e)(1),

(f)(5), title II, Sec. 202(f), Jan. 12, 1983, 96 Stat. 2370, 2372,

2396; Pub. L. 98-21, title I, Sec. 122(c)(1), Apr. 20, 1983, 97

Stat. 87; Pub. L. 98-369, div. A, title I, Secs. 16(a), 31(f),

113(b)(2)(B), title IV, Secs. 431(a), (b)(1), (d)(1)-(3),

474(o)(1)-(7), title VII, Sec. 713(c)(1)(C), July 18, 1984, 98

Stat. 505, 521, 637, 805, 807, 810, 834-836, 957; Pub. L. 99-514,

title II, Secs. 201(d)(7)(B), 251(a), title IV, Sec. 421(a), (b),

title XVIII, Secs. 1802(a)(6), (8), 1844(a), (b)(3), (5),

1847(b)(11), 1848(a), Oct. 22, 1986, 100 Stat. 2141, 2183, 2229,

2789, 2855, 2857; Pub. L. 100-647, title I, Secs. 1002(a)(4), (15),

(17), (25), 1009(a)(1), 1013(a)(44), title IV, Sec. 4006, Nov. 10,

1988, 102 Stat. 3353, 3355, 3356, 3445, 3545, 3652; Pub. L.

101-239, title VII, Secs. 7106, 7814(d), Dec. 19, 1989, 103 Stat.

2306, 2413; Pub. L. 101-508, title XI, Secs. 11406, 11813(a), Nov.

5, 1990, 104 Stat. 1388-474, 1388-536.)

-MISC1-

AMENDMENTS

1990 - Pub. L. 101-508, Sec. 11813(a), amended section generally,

substituting present provisions for provisions relating to amount

of investment credit, determination of percentages, qualified

investments and qualified progress expenditures, limitations with

respect to certain persons, a limitation in the case of certain

regulated companies, a 50 percent credit in the case of certain

vessels, and special rule for cooperatives.

Subsec. (b)(2)(A). Pub. L. 101-508, Sec. 11406, substituted "Dec.

31, 1991" for "Sept. 30, 1990" in table items (viii) C. and (ix) B.

1989 - Subsec. (b)(2)(A). Pub. L. 101-239, Sec. 7106, substituted

"Sept. 30, 1990" for "Dec. 31, 1989" in table items (viii) C., (ix)

B., and (x).

Pub. L. 101-239, Sec. 7814(d), made technical correction to

language of Pub. L. 100-647, Sec. 4006, see 1988 Amendment note

below.

1988 - Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 4006, as amended

by Pub. L. 101-239, Sec. 7814(d), substituted "1989" for "1988" in

table items (viii) C., (ix) B., and (x).

Subsec. (c)(5)(B). Pub. L. 100-647, Sec. 1013(a)(44), substituted

"private activity bonds" for "industrial development bonds" in

heading, and in text substituted "a private activity bond (within

the meaning of section 141)" for "an industrial development bond

(within the meaning of section 103(b)(2))".

Subsec. (c)(7). Pub. L. 100-647, Sec. 1002(a)(17), substituted

"property to which section 168 applies" for "recovery property" in

heading, substituted "property to which section 168 applies" for

"recovery property" and "168(e)" for "168(c)" in subpar. (A),

substituted "168(e)" for "168(c)" in subpar. (B), and inserted "(as

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

Reform Act of 1986)" after "section 168(f)(3)(B)" in concluding

provisions.

Subsec. (d)(1)(B)(i). Pub. L. 100-647, Sec. 1002(a)(25)(A),

substituted "property to which section 168 applies" for "recovery

property (within the meaning of section 168)".

Subsec. (d)(1)(B)(ii). Pub. L. 100-647, Sec. 1002(a)(25)(B),

substituted "to which section 168 does not apply" for "which is not

recovery property (within the meaning of section 168)".

Subsec. (e)(3). Pub. L. 100-647, Sec. 1002(a)(15), substituted

"property to which section 168 applies" for "recovery property

(within the meaning of section 168)", "class life" for "present

class life", and "168(i)(1)" for "168(g)(2)".

Subsec. (e)(4)(B). Pub. L. 100-647, Sec. 1002(a)(4)(A),

substituted "168(i)(3)" for "168(j)(6)".

Subsec. (e)(4)(C). Pub. L. 100-647, Sec. 1009(a)(1), inserted

provisions at end which provided that any such election shall

terminate effective with respect to the 1st taxable year of the

organization making such election which begins after 1986, and

which defined "regular investment tax credit property".

Subsec. (e)(4)(D). Pub. L. 100-647, Sec. 1002(a)(4)(B),

substituted "paragraphs (5) and (6) of section 168(h)" for

"paragraphs (8) and (9) of section 168(j)".

Subsec. (e)(4)(E). Pub. L. 100-647, Sec. 1002(a)(4)(C), (D),

substituted "168(h)" for "168(j)" and "168(h)(2)" for "168(j)(4)".

1986 - Subsec. (b)(2)(A). Pub. L. 99-514, Sec. 1847(b)(11),

substituted "48(l)(3)(A)(viii)" for "48(l)(3)(A)(vii)" in table

item (ii).

Pub. L. 99-514, Sec. 421(a), inserted table items (viii) to (xi).

Subsec. (b)(2)(E). Pub. L. 99-514, Sec. 421(b), added subpar.

(E).

Subsec. (b)(4). Pub. L. 99-514, Sec. 251(a), in amending par. (4)

generally, substituted in subpar. (A) definition of "rehabilitation

percentage" for former table specifying specific rehabilitation

percentages, reenacted subpar. (B), and struck out subpar. (C)

which related to definitions.

Subsec. (c)(8)(D)(v). Pub. L. 99-514, Sec. 1844(a), substituted

"this subparagraph" for "clause (i)".

Pub. L. 99-514, Sec. 201(d)(7)(B), substituted "section

465(b)(3)(C)" for "section 168(e)(4)".

Subsec. (c)(9)(A). Pub. L. 99-514, Sec. 1844(b)(3), substituted

"an increase in the credit base for" for "additional qualified

investment in".

Subsec. (c)(9)(C)(i). Pub. L. 99-514, Sec. 1844(b)(5),

substituted "any increase in a taxpayer's credit base for any

property by reason of this paragraph shall be taken into account as

if it were property placed in service by the taxpayer in the

taxable year in which the property referred to in subparagraph (A)

was first placed in service" for "any increase in a taxpayer's

qualified investment in property by reason of this paragraph shall

be deemed to be additional qualified investment made by the

taxpayer in the year in which the property referred to in

subparagraph (A) was first placed in service".

Subsec. (e)(4)(D), (E). Pub. L. 99-514, Sec. 1802(a)(6), (8),

added subpars. (D) and (E).

Subsec. (f)(9). Pub. L. 99-514, Sec. 1848(a), struck out par. (9)

which related to a special rule for additional credit.

1984 - Subsec. (a). Pub. L. 98-369, Sec. 474(o)(1), amended

subsec. (a) generally, so as to contain provisions relating to

amount of investment credit, which formerly constituted only par.

(2)(A)(i), (ii), and (iv) of subsec. (a).

Subsec. (a)(4). Pub. L. 98-369, Sec. 713(c)(1)(C), substituted

"premature distributions to key employees" for "premature

distributions to owner-employees".

Subsec. (b). Pub. L. 98-369, Sec. 474(o)(1), amended subsec. (b)

generally, substituting provisions relating to determination of

percentages for purposes of subsec. (a), for provisions relating to

carryback and carryover of unused credits.

Subsec. (c)(7)(A). Pub. L. 98-369, Sec. 13(b)(2)(B), inserted

"recovery" before first reference to "property".

Subsec. (c)(8). Pub. L. 98-369, Sec. 431(a), substituted "Certain

nonrecourse financing excluded from credit base" for "Limitation to

amount at risk" in heading.

Subsec. (c)(8)(A). Pub. L. 98-369, Sec. 431(a), substituted

provisions reducing the credit base of any property to which this

paragraph applies by the nonqualified nonrecourse financing with

respect to such property for provisions relating to limitation of

the basis to the amount at risk in the case of new or used section

38 property placed in service during the taxable year by a taxpayer

described in section 465(a)(1) and used in connection with an

activity with respect to which any loss was subject to limitation

under section 465.

Subsec. (c)(8)(B). Pub. L. 98-369, Sec. 431(a), substituted

provisions relating to the property to which this paragraph applies

for provisions defining "at risk" and stating the circumstances

under which a taxpayer would be considered to be at risk for

purposes of this paragraph.

Subsec. (c)(8)(C). Pub. L. 98-369, Sec. 431(a), substituted

provisions defining "credit base" for provisions relating to a

special rule for partnerships and subchapter S corporations.

Subsec. (c)(8)(D). Pub. L. 98-369, Sec. 431(a), substituted

provisions defining "nonqualified nonrecourse financing" for

provisions defining "qualified person".

Subsec. (c)(8)(D)(i)(I). Pub. L. 98-369, Sec. 16(a), repealed

amendments made by Pub. L. 97-34, Sec. 302(c). See 1981 Amendment

note below.

Subsec. (c)(8)(E). Pub. L. 98-369, Sec. 431(a), substituted

provisions relating to the application of this paragraph to

partnerships and subchapter S corporations for provisions defining

"related person".

Subsec. (c)(8)(F)(i). Pub. L. 98-369, Sec. 431(d)(1), substituted

provisions that subpar. (A) shall not apply with respect to

qualified energy property for provisions that subpar. (A) would not

apply to amounts borrowed with respect to qualified energy property

(other than amounts described in subpar. (B)).

Subsec. (c)(8)(F)(ii)(II). Pub. L. 98-369, Sec. 474(o)(2),

substituted "subsection (b)(2)" for "section 46(a)(2)(C)".

Subsec. (c)(8)(F)(ii)(III). Pub. L. 98-369, Sec. 431(d)(2),

substituted provisions that qualified energy property means energy

property to which (but for this subpar.) subpar. (A) applies and

not more than 75 percent of the basis of which is attributable to

nonqualified nonrecourse financing for provisions that qualified

energy property meant energy property to which (but for this

subpar.) subpar. (A) applied and with respect to which the taxpayer

was at risk (within the meaning of section 465(b) without regard to

par. (5) thereof) in an amount equal to at least 25 percent of the

basis of the property.

Subsec. (c)(8)(F)(ii)(IV). Pub. L. 98-369, Sec. 431(d)(3),

substituted "nonqualified nonrecourse financing" for "nonrecourse

financing (other than financing described in section

46(c)(8)(B)(ii))".

Subsec. (c)(9). Pub. L. 98-369, Sec. 431(b)(1), substituted

provisions relating to subsequent decreases in nonqualified

nonrecourse financing with respect to the property for provisions

relating to subsequent increases in the taxpayer's amount at risk

with respect to the property.

Subsec. (e)(1). Pub. L. 98-369, Sec. 474(o)(3)(A), struck out

"and the $25,000 amount specified under subparagraphs (A) and (B)

of subsection (a)(3)", and substituted "such qualified investment"

for "such items", in provisions following subpar. (B).

Subsec. (e)(2). Pub. L. 98-369, Sec. 474(o)(3)(B), substituted

"qualified investment" for "the items described therein" in

introductory provisions.

Subsec. (e)(4). Pub. L. 98-369, Sec. 31(b), added par. (4).

Subsec. (f)(1). Pub. L. 98-369, Sec. 474(o)(4)(A), substituted

"no credit determined under subsection (a) shall be allowed by

section 38" for "no credit shall be allowed by section 38" in

introductory provisions.

Subsec. (f)(1)(A), (B). Pub. L. 98-369, Sec. 474(o)(4)(B),

substituted "the credit determined under subsection (a) and

allowable by section 38" for "the credit allowable by section 38".

Subsec. (f)(2). Pub. L. 98-369, Sec. 474(o)(4)(A), substituted

"no credit determined under subsection (a) shall be allowed by

section 38" for "no credit shall be allowed by section 38" in

introductory provisions.

Subsec. (f)(2)(A), (B). Pub. L. 98-369, Sec. 474(o)(4)(B),

substituted "the credit determined under subsection (a) and

allowable by section 38" for "the credit allowable by section 38".

Subsec. (f)(4)(B). Pub. L. 98-369, Sec. 474(o)(4)(C), substituted

"the credit determined under subsection (a) and allowed by section

38" for "the credit allowed by section 38" in introductory

provisions.

Subsec. (f)(8). Pub. L. 98-369, Sec. 474(o)(5), substituted "the

credit determined under subsection (a) and allowable under section

38" for "the credit allowable under section 38" in two places, and

"(within the meaning of the first sentence of subsection

(c)(3)(B))" for "(within the meaning of subsection (a)(7)(C))".

Subsec. (g)(2). Pub. L. 98-369, Sec. 474(o)(6), substituted "the

limitation of section 38(c)" for "the limitation of subsection

(a)(3)".

Subsec. (h)(1). Pub. L. 98-369, Sec. 474(o)(7), substituted "the

credit determined under subsection (a) and allowable to the

organization under section 38" for "the credit allowable to the

organization under section 38" and "the limitation contained in

section 38(c)" for "the limitation contained in subsection (a)(3)".

1983 - Subsec. (a)(2)(C)(i). Pub. L. 97-424, Sec. 546(b), added

section VII to the table.

Subsec. (a)(2)(C)(iii)(I). Pub. L. 97-448, Sec. 202(f),

substituted "before January 1, 1983, all engineering studies in

connection with the commencement of the construction of the project

have been completed and all environmental and construction permits

required under Federal, State, or local law in connection with the

commencement of the construction of the project have been applied

for, and" for "before January 1, 1983, the taxpayer has completed

all engineering studies in connection with the commencement of the

construction of the project, and has applied for all environmental

and construction permits required under Federal, State, or local

law in connection with the commencement of the construction of the

project, and".

Subsec. (a)(2)(F)(iii)(II). Pub. L. 97-448, Sec. 102(f)(5)(A),

substituted "a qualified rehabilitated building" for "any

building".

Subsec. (a)(2)(F)(iii)(III). Pub. L. 97-448, Sec. 102(f)(5)(B),

substituted "means a qualified rehabilitated building which meets

the requirements of section 48(g)(3)" for "has the meaning given to

such term by section 48(g)(3)".

Subsec. (a)(4)(B). Pub. L. 98-21 substituted "relating to credit

for the elderly and the permanently and totally disabled" for

"relating to credit for the elderly".

Subsec. (c)(7). Pub. L. 97-448, Sec. 102(e)(1), substituted "in

the case of property other than 3-year property (within the meaning

of section 168(c))" for "in the case of 15-year public utility,

10-year, or 5-year property (within the meaning of section 168(c))"

in subpar. (A) and, in provisions following subpar. (B),

substituted "shall be treated as property which is not 3-year

property" for "shall be treated as 5-year property".

Subsec. (f)(10). Pub. L. 97-424, Sec. 541(b), added par. (10).

1982 - Subsec. (a)(3)(B). Pub. L. 97-248, Sec. 205(b)(1),

substituted "85 percent" for "the following percentage",

substituted a period for the colon, and struck out table of

percentages at end of subpar. (B).

Subsec. (a)(4). Pub. L. 97-354, Sec. 5(a)(4), substituted

"section 1374 (relating to tax on certain capital gains of S

corporations)" for "section 1378 (relating to tax on certain

capital gains of subchapter S corporations)".

Pub. L. 97-248, Secs. 201(d)(8)(A), formerly 201(c)(8)(A),

265(b)(2)(A), substituted "(relating to corporate minimum tax)" for

"(relating to minimum tax for tax preferences)" after "section 56",

and inserted "section 72(q)(1) (relating to 5-percent tax on

premature distributions under annuity contracts)," after

"owner-employees)".

Subsec. (a)(7). Pub. L. 97-248, Sec. 205(b)(2), redesignated par.

(9) as (7), and, in par. (7)(B), as so redesignated, substituted

reference to 85 percent for former reference to the percentage

determined under subsec. (a)(3)(B) in cl. (i), struck out former

cl. (ii), which provided that pars. (7) and (8) would not apply in

certain instances, and redesignated former cl. (iii) as (ii).

Former par. (7), which provided for alternative limitations in the

case of certain utilities, was struck out.

Subsec. (a)(8). Pub. L. 97-248, Sec. 205(b)(2)(A), struck out

par. (8) which provided for alternative limitations in the case of

certain railroads and airlines.

Subsec. (a)(9). Pub. L. 97-248, Sec. 205(b)(2)(A), redesignated

par. (9) as (7).

Subsec. (c)(8)(C). Pub. L. 97-354, Sec. 5(a)(5), substituted "S

corporation" for "electing small business corporation (within the

meaning of section 1371(b))".

Subsec. (e)(3). Pub. L. 97-354, Sec. 5(a)(6), substituted "an S

corporation" for "an electing small business corporation (as

defined in section 1371)".

1981 - Subsec. (a)(2)(A)(iv). Pub. L. 97-34, Sec. 212(a)(1),

added cl. (iv).

Subsec. (a)(2)(E). Pub. L. 97-34, Sec. 332(a), substituted

"December 31, 1982" for "December 31, 1983" in cls. (i) and (ii)

and added cl. (iii).

Subsec. (a)(2)(F). Pub. L. 97-34, Sec. 212(a)(2), added subpar.

(F).

Subsec. (b)(1). Pub. L. 97-34, Sec. 207(c)(1), inserted provision

after subpar. (D) directing that, in the case of an unused credit

for an unused credit year ending after Dec. 31, 1973, this

paragraph be applied by substituting "15" for "7" in subpar. (B)

and by substituting "18" for "10" and "17" for "9" in second

sentence.

Subsec. (c)(2). Pub. L. 97-34, Sec. 211(e)(1), inserted

references in provisions preceding table to exceptions provided in

paragraphs (3), (6), and (7).

Subsec. (c)(6)(A). Pub. L. 97-34, Sec. 211(e)(2), substituted

"Notwithstanding paragraph (2) or (3)" for "Notwithstanding

paragraph (2)" and inserted "or which is recovery property (within

the meaning of section 168)," after "3 years or more,".

Subsec. (c)(7). Pub. L. 97-34, Sec. 211(a)(1), added par. (7).

Subsec. (c)(8). Pub. L. 97-34, Sec. 211(f)(1), added par. (8).

Subsec. (c)(8)(D)(i)(I). Pub. L. 97-34, Sec. 302(c)(3), (d)(1),

provided that, applicable to taxable years beginning after Dec. 31,

1984, subsection (c)(8)(D)(i)(I) of this section (relating to

limitation to amount at risk) is amended by striking out "clause

(i), (ii), or (iii) of subparagraph (A) or subparagraph (B) of

section 128(c)(2)" and inserting in lieu thereof "subparagraph (A)

or (B) of section 128(c)(1)". Section 16(a) of Pub. L. 98-369,

repealed section 302(c) of Pub. L. 97-34, and provided that this

title shall be applied and administered as if section 302(c), and

the amendments made by section 302(c), had not been enacted.

Subsec. (c)(9). Pub. L. 97-34, Sec. 211(f)(1), added par. (9).

Subsec. (d)(1). Pub. L. 97-34, Sec. 211(b)(1), designated

existing provisions as subpar. (A), substituted "an amount equal to

the aggregate of the applicable percentage of each qualified

progress expenditure for the taxable year" for "an amount equal to

his aggregate qualified progress expenditures for the taxable year"

in subpar. (A) as so designated, and added subpar. (B).

Subsec. (d)(2)(A)(ii). Pub. L. 97-34, Sec. 211(b)(2), struck out

"having a useful life of 7 years or more" after "it is reasonable

to believe will be new section 38 property".

Subsec. (e)(3). Pub. L. 97-34, Sec. 211(d), in provisions

following subpar. (B), inserted provision that, for purposes of

subpar. (B), in the case of any recovery property (within the

meaning of section 168), the useful life be the present class life

for such property (as defined in section 168(g)(2)).

1980 - Subsec. (a)(2)(A). Pub. L. 96-222, Sec.

101(a)(7)(L)(iii)(I), substituted "employee plan" for "ESOP".

Subsec. (a)(2)(C). Pub. L. 96-223, Sec. 221(a), revised

provisions relating to energy percentage by substituting a tabular

format embracing separate coverage for solar, wind, or geothermal

property, ocean thermal property, qualified hydroelectric

generating property, and biomass property using percentages varying

between 10 and 15 percent and covering periods from Oct. 1, 1978,

to Dec. 31, 1985, with longer periods for certain long-term

projects and certain hydroelectric generating property for

provisions that had set the energy percentage at 10 percent for the

period beginning Oct. 1, 1978, and ending Dec. 31, 1982, and zero

with respect to any other period.

Subsec. (a)(2)(D). Pub. L. 96-223, Sec. 222(e)(2), inserted

provision that in the case of any qualified hydroelectric

generating property which is a fish passageway, the special rule

for certain energy property embraced in the first sentence would

not apply to any period after 1979 for which the energy percentage

for such property is greater than zero.

Subsec. (a)(2)(E). Pub. L. 96-222, Sec. 101(a)(7)(L)(v)(I),

(M)(i), substituted in heading "employee plan" for "ESOP" and in

cls. (i) and (ii) inserted "and ending on" before "December 31,

1983".

Subsec. (a)(9). Pub. L. 96-222, Sec. 103(a)(2)(B)(i),

redesignated par. (10) as (9). A former par. (9) was previously

repealed by section 312(b)(2) of Pub. L. 95-600.

Subsec. (a)(9)(A). Pub. L. 96-223, Sec. 223(b)(1)(A), inserted

"and" at end of cl. (i), substituted a period for "(other than

solar wind energy property), and" at end of cl. (ii), and struck

out cl. (iii) which had provided for the application of so much of

the credit allowed by section 38 as was attributable to the

application of the energy percentage to solar or wind energy

property.

Subsec. (a)(9)(B). Pub. L. 96-223. Sec. 223(b)(1)(B), struck out

"other than solar or wind energy property" after "energy property"

in heading.

Pub. L. 96-222, Sec. 103(a)(2)(B)(ii), (iii), substituted

"paragraph (3)(B) shall be applied by substituting '100 percent'

for the percentage determined under the table contained in such

paragraph" for "paragraph (3)(C) shall be applied by substituting

'100 percent' for '50 percent' " in cl. (i) and "(7) and (8)" for

"(7), (8), and (9)" in cl. (ii).

Subsec. (a)(9)(C). Pub. L. 96-223, Sec. 223(b)(1)(C), struck out

subpar. (C) which related to a refundable credit for solar or wind

energy property.

Subsec. (a)(10). Pub. L. 96-222, Sec. 103(a)(2)(B)(i),

redesignated par. (10) as (9).

Subsec. (c)(5)(B). Pub. L. 96-222, Sec. 103(a)(3), inserted

provisions requiring that this subparagraph not apply for purposes

of applying the energy percentage.

Subsec. (e)(3). Pub. L. 96-222, Sec. 103(a)(4)(A), inserted

provisions requiring that this paragraph not apply with respect to

any property which is treated as section 38 property by reason of

section 48(a)(1)(E).

Subsec. (f)(1), (2). Pub. L. 95-600, Sec. 312(c)(2), as amended

by Pub. L. 96-222, Sec. 103(a)(2)(A), substituted " 'described in

section 50 (as in effect before its repeal by the Revenue Act of

1978)' " for " 'described in section 50' ".

Subsec. (f)(8). Pub. L. 96-222, Sec. 107(a)(3)(A), substituted

"subsection (a)(7)(C)" for "subsection (a)(7)(D)".

Subsec. (f)(9). Pub. L. 96-222, Sec. 101(a)(7)(A), substituted in

provisions preceding subpar. (A) "subparagraph (E) of subsection

(a)(2)" for "subparagraph (B) of subsection (a)(2)" and in subpar.

(A) "a tax credit employee stock ownership plan which meets the

requirements of section 409A" for "an employee ownership plan which

meets the requirements of section 301(d) of the Tax Reduction Act

of 1975".

1978 - Subsec. (a)(2). Pub. L. 95-618, Sec. 301(a)(1), among

other changes, inserted provisions relating to an alternative

energy property tax credit which would pay for a certain percentage

of the cost of equipment which uses sources of energy other than

oil and gas and of associated pollution control, handling, and

preparation equipment.

Subsec. (a)(2)(B). Pub. L. 95-600, Sec. 311(a), made 10 percent

limitation on investment tax credit permanent.

Subsec. (a)(2)(E). Pub. L. 95-600, Sec. 141(e), (f)(2),

substituted "December 31, 1983" for "and ending on December 31,

1980" wherever appearing, "section 48(n)(1)(B)" for "section 301(e)

of the Tax Reduction Act of 1975" and "section 409A" for "section

301(d) of the Tax Reduction Act of 1975".

Subsec. (a)(3). Pub. L. 95-600, Sec. 312(a), increased the

present 50 percent tax liability limitation to 90 percent, to be

phased in at an additional 10 percentage points per year beginning

with taxable years which end in 1979.

Subsec. (a)(7). Pub. L. 95-600, Sec. 312(b)(1), in subpar. (A)

substituted "the taxable year ending in 1979" for "a taxable year

ending after calendar year 1974 and before calendar year 1981",

"subparagraph (B)" for "subparagraph (C)", and "for '60 percent'

the taxpayer's" for "for 50 percent his" and inserted "the

application of this paragraph results in a percentage higher than

60 percent," before "then subparagraph (B)"; in subpar. (B)

substituted "70 percent" for "50 percent plus the tentative

percentage for such year"; struck out former subpar. (C), which

related to the determination of the tentative percentage, and

redesignated former subpar. (D) as (C).

Subsec. (a)(8). Pub. L. 95-600, Sec. 312(b)(2), in subpar. (A)

substituted "the taxable year ending in 1979" for "a taxable year

ending after calendar year 1976, and before calendar year 1983",

"subparagraph (B)" for "subparagraph (C)", and "for '60 percent'

('70 percent' in the case of a taxable year ending in 1980) the

taxpayer's" for "for 50 percent his" and inserted reference to

airline property and "the application of this paragraph results in

a percentage higher than 60 percent (70 percent in the case of a

taxable year ending in 1980)," before "then subparagraph (B)"; in

subpar. (B) inserted reference to airline property and substituted

"90 percent (80 percent in the case of a taxable year ending in

1980)" for "50 percent plus the tentative percentage for such

year"; in subpar. (C) table struck out tentative percentage of 50

for 1977 or 1978, 20 for 1981, and 10 for 1982; and added subpar.

(E).

Subsec. (a)(9). Pub. L. 95-600, Sec. 312(b)(2), struck out par.

(9) which related to the alternative limitation in the case of

certain airlines.

Subsec. (a)(10). Pub. L. 95-618, Sec. 301(c)(1), added par. (10).

Subsec. (c)(3)(A). Pub. L. 95-618, Sec. 301(a)(2)(A), substituted

"For the period beginning on January 1, 1981, in the case of any

property" for "To the extent that subsection (a)(2)(C) applies to

property" and inserted provisions that the preceding sentence not

apply for purposes of applying the energy percentage. See

Codification note above.

Pub. L. 95-600, Sec. 311(c)(1), substituted "To the extent that

the credit allowed by section 38 with respect to any public utility

property is determined at the rate of 7 percent" for "For the

period beginning on January 1, 1981". See Codification note above.

Subsec. (c)(5). Pub. L. 95-600, Sec. 313(a), increased the

investment credit available to pollution control facilities which a

taxpayer has elected to amortize over a five-year period to a full

investment credit from a one-half investment credit.

Subsec. (c)(6). Pub. L. 95-618, Sec. 241(a), added par. (6).

Subsec. (e)(1)(C). Pub. L. 95-600, Sec. 316(b)(1), struck out

subpar. (C) which related to a cooperative organization described

in section 1381(a).

Subsec. (e)(2)(C). Pub. L. 95-600, Sec. 316(b)(2), struck out

subpar. (C) which related to a cooperative organization.

Subsec. (f)(1), (2). Pub. L. 95-600, Sec. 312(c)(2), struck out

"described in section 50" after "with respect to any property". See

1980 Amendment note above.

Subsec. (f)(8). Pub. L. 95-618, Sec. 301(a)(2)(B), substituted ",

the Tax Reform Act of 1976, and the Energy Tax Act of 1978" for

"and the Tax Reform Act of 1976". See Codification note above.

Pub. L. 95-600, Secs. 311(c)(2), 703(a)(1), substituted

"subsection (a)(7)(D)" for "subsection (a)(6)(D)" and inserted

reference to the Revenue Act of 1978. See Codification note above.

Subsec. (g)(5). Pub. L. 95-600, Sec. 703(a)(2), substituted

"Merchant Marine Act, 1936" for "Merchant Marine Act, 1970".

Subsec. (h). Pub. L. 95-600, Sec. 316(a), added subsec. (h).

1976 - Subsec. (a)(1). Pub. L. 94-455, Sec. 802(a)(2), added par.

(1) and struck out former par. (1) which related to the percentage

of allowable credit under section 38.

Subsec. (a)(2). Pub. L. 94-455, Sec. 802(a)(2), added par. (2).

Former par. (2) redesignated (3).

Subsec. (a)(3). Pub. L. 94-455, Sec. 802(a)(1), redesignated

former par. (2) as (3). Former par. (3) redesignated (4).

Subsec. (a)(4). Pub. L. 94-455, Secs. 503(b)(4), 802(a)(1),

(b)(1), 1901(a)(4)(A), (b)(1)(C), as amended by Pub. L. 95-600,

Sec. 703(j)(9), redesignated former par. (3) as (4), and in par.

(4) as so redesignated, redesignated former subpar. (C) as (B) and

substituted in provisions preceding subpar. (A) "paragraph (3)" for

"paragraph (2)", in subpar. (B) as so redesignated "credit for the

elderly" for "retirement income", and in provisions following

subpar. (B) "section 408(f)" for "section 408(e)". Former par. (4)

redesignated (5).

Subsec. (a)(5). Pub. L. 94-455, Sec. 802(a)(1), (b)(1),

redesignated former par. (4) as (5) and substituted "paragraph (3)"

for "paragraph (2)". Former par. (5) redesignated (6).

Subsec. (a)(6). Pub. L. 94-455, Secs. 802(a)(1), (b)(1),

1906(b)(13)(A), redesignated former par. (5) as (6) and substituted

"paragraph (3)" for "paragraph (2)" and struck out "or his

delegate" after "Secretary". Former par. (6) redesignated (7).

Subsec. (a)(7). Pub. L. 94-455, Sec. 802(a)(1), (b)(1),

redesignated former par. (6) as (7) and substituted "paragraph (3)"

for "paragraph (2)".

Subsec. (a)(8). Pub. L. 94-455, Sec. 1701(b), added par. (8).

Subsec. (a)(9). Pub. L. 94-455, Sec. 1703, added par. (9).

Subsec. (b). Pub. L. 94-455, Sec. 802(b)(2), among other changes,

inserted requirement that tax credits carried over are applied

first to the tax liability for that year, after which tax credits

earned currently are then applied.

Subsec. (c)(3)(A). Pub. L. 94-455, Sec. 802(b)(3), substituted

"subsection (a)(2)(C)" for "subsection (a)(1)(C)".

Subsec. (c)(3)(B)(iii). Pub. L. 94-455, Sec. 1901(a)(4)(B),

substituted "47 U.S.C. 222(a)(5)" for "47 U.S.C., sec. 222(a)(5)".

Subsec. (c)(5). Pub. L. 94-455, Sec. 2112(a)(2), added par. (5).

Subsec. (d)(4)(D), (6). Pub. L. 94-455, Sec. 1906(b)(13)(A),

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

Subsec. (e)(1)(C). Pub. L. 94-455, Sec. 802(b)(4), substituted

"subsection (a)(3)" for "subsection (a)(2)".

Subsec. (e)(2). Pub. L. 94-455, Sec. 1607(b)(1)(B), substituted

in subpar. (B) "857(b)(2)(B)" for "857(b)(2)(C)" and inserted in

provisions following subpar. (C) reference to determine without

regard to any deduction for capital gains dividends (as defined in

section 857(b)(3)(C)) and by excluding any net capital gain.

Subsec. (f)(1)(B), (2), (3). Pub. L. 94-455, Sec. 1906(b)(13)(A),

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

Subsec. (f)(4)(A). Pub. L. 94-455, Sec. 803(b)(1)(A), (B),

substituted "paragraphs (1), (2), and (9)" for "paragraphs (1) and

(2)" and "paragraph (1), (2), or (9)" for "paragraph (1) or (2)"

wherever appearing.

Subsec. (f)(4)(B)(ii). Pub. L. 94-455, Sec. 803(b)(1)(C),

substituted "paragraph (2) or the election described in paragraph

(9)," for "paragraph (2),".

Subsec. (f)(7). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out

"or his delegate" after "Secretary".

Subsec. (f)(8). Pub. L. 94-455, Secs. 802(b)(5), 1906(b)(13)(A),

inserted reference to the Tax Reform Act of 1976 and struck out "or

his delegate" after "Secretary".

Subsec. (f)(9). Pub. L. 94-455, Sec. 803(a), added par. (9).

Subsec. (g). Pub. L. 94-455, Sec. 805(a), added subsec. (g).

1975 - Subsec. (a)(1). Pub. L. 94-12, Sec. 301(a), designated

existing provisions as subpar. (A), substituted "Except as

otherwise provided in this paragraph, in the case of a property

described in subparagraph (D), the" for "The", "10 percent" for "7

percent", and "(as determined under subsections (c) and (d))" for

"(as defined in subsection (c))" in subpar. (A) as so designated,

and added subpars. (B), (C), and (D).

Subsec. (a)(6). Pub. L. 94-12, Sec. 301(b)(2), added par. (6).

Subsec. (c)(3)(A). Pub. L. 94-12, Sec. 301(b)(1), substituted "To

the extent that subsection (a)(1)(C) applies to property which is

public utility property, the" for "In the case of section 38

property which is public utility property, the".

Subsec. (c)(4). Pub. L. 94-12, Sec. 302(b)(1), added par. (4).

Subsecs. (d), (e). Pub. L. 94-12, Sec. 302(a), added subsec. (d)

and redesignated former subsec. (d) as (e). Former subsec. (e)

redesignated (f) and amended.

Subsec. (f). Pub. L. 94-12, Secs. 301(b)(3), 302(a), redesignated

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

added par. (8).

1974 - Subsec. (a)(3). Pub. L. 93-406 inserted reference to

section 402(e) (relating to tax on lump sum distributions), section

72(m)(5)(B) (relating to 10 percent tax on premature distributions

to owner-employees), and section 408(e) (relating to additional tax

on income from certain retirement accounts).

1971 - Subsec. (b)(1). Pub. L. 92-178, Sec. 106(b), inserted

concluding sentence "In the case of an unused credit for an unused

credit year ending before January 1, 1971, which is an investment

credit carryover to a taxable year beginning after December 31,

1970 (determined without regard to this sentence), this paragraph

shall be applied by substituting '10 taxable years' for '7 taxable

years' in subparagraph (B) and by substituting '13 taxable years'

for '10 taxable years' and '12 taxable years' for '9 taxable years'

in the preceding sentence."

Subsec. (b)(3). Pub. L. 92-178, Sec. 106(a), added par. (3).

Subsec. (b)(5). Pub. L. 92-178, Sec. 106(c)(1), substituted

"Certain taxable years ending in 1969, 1970, or 1971" for "Taxable

years beginning after December 31, 1968, and ending after April 18,

1969" in heading; substituted "ending after April 18, 1969, and

before January 1, 1972," for "ending after April 18, 1969,"; and

provided that "In the case of a taxable year ending after August

15, 1971, and before January 1, 1972, the percentage contained in

the preceding sentence shall be increased by 6 percentage points

for each month (or portion thereof) in the taxable year after

August 15, 1971".

Subsec. (b)(6). Pub. L. 92-178, Sec. 106(c)(2), substituted

"ending after April 18, 1969, and before January 1, 1971," for

"ending after April 18, 1969," and "following the 7th taxable year

after the unused credit year" for "following the last taxable year

for which such portion may be added under paragraph (1)",

respectively.

Subsec. (c)(2). Pub. L. 92-178, Sec. 102(a)(1), (b), substituted

"3 years", "5 years", and "7 years" for "4 years" (once), "6 years"

(twice), and "8 years" (twice), respectively in tables of first

sentence and substituted in second sentence "subpart" for

"paragraph" and "useful life of any property shall be the useful

life used in computing the allowance for depreciation under section

167 for the taxable year in which the property is placed in

service" for "useful life of any property shall be determined as of

the time such property is placed in service by the taxpayer".

Subsec. (c)(3)(A). Pub. L. 92-178, Sec. 105(a), substituted the

fraction of " 4/7 " for " 3/7 ".

Subsec. (c)(3)(B). Pub. L. 92-178, Sec. 105(b)(1), (2), struck

out cl. (iii) provisions respecting telephone service, redesignated

cl. (iv) as (iii), included in cl. (iii) provision of former cl.

(iii) respecting telephone service, included other communication

services (other than international telegraph service), and defined

term "public utility property" to also mean communication property

of type used by persons engaged in providing telephone or microwave

communication services to which cl. (iii) applies, if such property

is used predominantly for communication purposes, respectively.

Subsec. (c)(3)(C). Pub. L. 92-178, Sec. 105(b)(3), added subpar.

(C).

Subsec. (c)(4). Pub. L. 92-178, Sec. 107(a)(1), struck out

provisions respecting reduction in basis or cost of certain

replacement property.

Subsec. (d)(3). Pub. L. 92-178, Sec. 108(a), added par. (3).

Subsec. (e). Pub. L. 92-178, Sec. 105(c), added subsec. (e).

1969 - Subsec. (a)(3). Pub. L. 91-172, Sec. 301(b)(4), inserted

"section 56 (relating to minimum tax for tax preference),".

Subsec. (a)(5). Pub. L. 91-172, Sec. 401(e)(1), reenacted

subsection with minor changes and substituted reference to section

1563(a) for reference to section 1504.

Subsec. (b)(5), (6). Pub. L. 91-172, Sec. 703(b), added pars. (5)

and (6).

1967 - Subsec. (b). Pub. L. 90-225 struck out par. (3) which

provided that to the extent that the excess described in par. (1)

of this subsection arises by reason of net operating loss

carryback, subpar. (A) of par. (1) of this subsection shall not

apply.

1966 - Subsec. (a)(2). Pub. L. 89-800, Sec. 3(a), inserted "for

taxable years ending on or before the last day of the suspension

period (as defined in section 48(j))," at beginning of subpar. (B),

and added subpar. (C) and provisions following subpar. (C) covering

the application of subpar. (C) and the reduction of the amount

otherwise determined under par. (2) by the credit allowable but for

the application of section 48(h)(1).

Subsec. (a)(3). Pub. L. 89-389 inserted reference to tax imposed

for the taxable year by section 1378 (relating to tax on certain

capital gains of subchapter S corporations) in the list of taxes

not to be considered tax imposed by this chapter for purposes of

par. (3).

Pub. L. 89-384 added any additional tax imposed for the taxable

year by section 1351 (relating to recoveries of foreign

expropriation losses) to the list of taxes not to be considered a

tax imposed by this chapter for purposes of par. (3).

Subsec. (b)(1). Pub. L. 89-800, Sec. 3(b), substituted "7 taxable

years" for "5 taxable years" in subpar. (B) and "10 taxable years"

and "other 9 taxable years" for "8 taxable years" and "other 7

taxable years" respectively in text following subpar. (B).

1964 - Subsec. (a)(3)(B) to (D). Pub. L. 88-272 struck out

subpar. (B) relating to section 34, and redesignated subpars. (C)

and (D) as (B) and (C), respectively.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by section 11813(a) of Pub. L. 101-508 applicable to

property placed in service after Dec. 31, 1990, but not applicable

to any transition property (as defined in section 49(e) of this

title), any property with respect to which qualified progress

expenditures were previously taken into account under section 46(d)

of this title, and any property described in section 46(b)(2)(C) of

this title, as such sections were in effect on Nov. 4, 1990, see

section 11813(c) of Pub. L. 101-508, set out as a note under

section 29 of this title.

EFFECTIVE DATE OF 1989 AMENDMENT

Amendment by section 7814(d) 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 OF 1988 AMENDMENT

Amendment by sections 1002(a)(4), (15), (17), (25), 1009(a)(1),

and 1013(a)(44) 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(d)(7)(B) 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.

Section 251(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,

title I, Sec. 1002(k), Nov. 10, 1988, 102 Stat. 3371, provided

that:

"(1) In general. - Except as otherwise provided in this

subsection, the amendments made by this section [amending this

section and section 48 of this title] shall apply to property

placed in service after December 31, 1986, in taxable years ending

after such date.

"(2) General transitional rule. - The amendments made by this

section and section 201 [amending this section and sections 48,

167, 168, 178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245, 4162,

6111, and 7701 of this title] shall not apply to any property

placed in service before January 1, 1994, if such property is

placed in service as part of -

"(A) a rehabilitation which was completed pursuant to a written

contract which was binding on March 1, 1986, or

"(B) a rehabilitation incurred in connection with property

(including any leasehold interest) acquired before March 2, 1986,

or acquired on or after such date pursuant to a written contract

that was binding on March 1, 1986, if -

"(i) parts 1 and 2 of the Historic Preservation Certification

Application were filed with the Department of the Interior (or

its designee) before March 2, 1986, or

"(ii) the lesser of $1,000,000 or 5 percent of the cost of

the rehabilitation is incurred before March 2, 1986, or is

required to be incurred pursuant to a written contract which

was binding on March 1, 1986.

"(3) Certain additional rehabilitations. - The amendments made by

this section and section 201 [amending this section and sections

48, 167, 168, 178, 179, 280F, 291, 312, 465, 467, 514, 751, 1245,

4162, 6111, and 7701 of this title] shall not apply to -

"(A) the rehabilitation of 8 bathhouses within the Hot Springs

National Park or of buildings in the Central Avenue Historic

District at such Park,

"(B) the rehabilitation of the Upper Pontalba Building in New

Orleans, Louisiana,

"(C) the rehabilitation of at least 60 buildings listed on the

National Register at the Frankford Arsenal,

"(D) the rehabilitation of De Baliveriere Arcade, St. Louis

Centre, and Drake Apartments in Missouri,

"(E) the rehabilitation of The Tides in Bristol, Rhode Island,

"(F) the rehabilitation and renovation of the Outlet Company

building and garage in Providence, Rhode Island,

"(G) the rehabilitation of 10 structures in Harrisburg,

Pennsylvania, with respect to which the Harristown Development

Corporation was designated redeveloper and received an option to

acquire title to the entire project site for $1 on June 27, 1984,

"(H) the rehabilitation of a project involving the renovation

of 3 historic structures on the Minneapolis riverfront, with

respect to which the developer of the project entered into a

redevelopment agreement with a municipality dated January 4,

1985, and industrial development bonds were sold in 3 separate

issues in May, July, and October 1985,

"(I) the rehabilitation of a bank's main office facilities of

approximately 120,000 square feet, in connection with which the

bank's board of directors authorized a $3,300,000 expenditure for

the renovation and retrofit on March 20, 1984,

"(J) the rehabilitation of 10 warehouse buildings built between

1906 and 1910 and purchased under a contract dated February 17,

1986,

"(K) the rehabilitation of a facility which is customarily used

for conventions and sporting events if an analysis of operations

and recommendations of utilization of such facility was prepared

by a certified public accounting firm pursuant to an engagement

authorized on March 6, 1984, and presented on June 11, 1984, to

officials of the city in which such facility is located,

"(L) Mount Vernon Mills in Columbia, South Carolina,

"(M) the Barbara Jordan II Apartments,

"(N) the rehabilitation of the Federal Building and Post

Office, 120 Hanover Street, Manchester, New Hampshire,

"(O) the rehabilitation of the Charleston Waterfront project in

South Carolina,

"(P) the Hayes Mansion in San Jose, California,

"(Q) the renovation of a facility owned by the National

Railroad Passenger Corporation ('Amtrak') for which project

Amtrak engaged a development team by letter agreement dated

August 23, 1985, as modified by letter agreement dated September

9, 1985,

"(R) the rehabilitation of a structure or its components which

is listed in the National Register of Historic Places, is located

in Allegheny County, Pennsylvania, will be substantially

rehabilitated (as defined in section 48(g)(1)(C) prior to

amendment by this Act), prior to December 31, 1989; and was

previously utilized as a market and an auto dealership,

"(S) The Bellevue Stratford Hotel in Philadelphia,

Pennsylvania,

"(T) the Dixon Mill Housing project in Jersey City, New Jersey,

"(U) Motor Square Garden,

"(V) the Blackstone Apartments, and the Shriver-Johnson

building, in Sioux Falls, South Dakota,

"(W) the Holy Name Academy in Spokane, Washington,

"(X) the Nike/Clemson Mill in Exeter, New Hampshire,

"(Y) the Central Bank Building in Grand Rapids, Michigan, and

"(Z) the Heritage Hotel, in the City of Marquette, Michigan.

"(4) Additional rehabilitations. - The amendments made by this

section and section 201 [amending sections 46, 48, 167, 168, 178,

179, 280F, 291, 312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701

of this title] shall not apply to -

"(A) the Fort Worth Town Square Project in Texas,

"(B) the American Youth Hostel in New York, New York,

"(C) The Riverwest Loft Development (including all three

phases, two of which do not involve rehabilitations),

"(D) the Gaslamp Quarter Historic District in California,

"(E) the Eberhardt & Ober Brewery, in Pennsylvania,

"(F) the Captain's Walk Limited Partnership-Harris Place

Development, in Connecticut,

"(G) the Velvet Mills in Connecticut,

"(H) the Roycroft Inn, in New York,

"(I) Old Main Village, in Mankato, Minnesota,

"(J) the Washburn-Crosby A Mill, in Minneapolis, Minnesota,

"(K) the Marble Arcade office building in Lakeland, Florida,

"(L) the Willard Hotel, in Washington, D.C.,

"(M) the H. P. Lau Building in Lincoln, Nebraska,

"(N) the Starks Building, in Louisville, Kentucky,

"(O) the Bellevue High School, in Bellevue, Kentucky,

"(P) the Major Hampden Smith House, in Owensboro, Kentucky,

"(Q) the Doe Run Inn, in Brandenburg, Kentucky,

"(R) the State National Bank, in Frankfort, Kentucky,

"(S) the Captain Jack House, in Fleming, Kentucky,

"(T) the Elizabeth Arlinghaus House, in Covington, Kentucky,

"(U) Limerick Shamrock, in Louisville, Kentucky,

"(V) the Robert Mills Project, in South Carolina,

"(W) the 620 Project, consisting of 3 buildings, in Kentucky,

"(X) the Warrior Hotel, Ltd., the first two floors of the

Martin Hotel, and the 105,000 square foot warehouse constructed

in 1910, all in Sioux City, Iowa,

"(Y) the waterpark condominium residential project, to the

extent of $2 million of expenditures,

"(Z) the Bigelow-Hartford Carpet Mill in Enfield, Connecticut,

"(AA) properties abutting 125th street in New York County from

7th Avenue west to Morningside and the pier area on the Hudson

River at the end of such 125th Street,

"(BB) the City of Los Angeles Central Library project pursuant

to an agreement dated December 28, 1983,

"(CC) the Warehouse Row project in Chattanooga, Tennessee,

"(DD) any project described in section 204(a)(1)(F) of this Act

[26 U.S.C. 168 note],

"(EE) the Wood Street Commons project in Pittsburgh,

Pennsylvania,

"(FF) any project described in section 803(d)(6) of this Act

[26 U.S.C. 263A note],

"(GG) Union Station, Indianapolis, Indiana,

"(HH) the Mattress Factory project in Pittsburgh, Pennsylvania,

"(II) Union Station in Providence, Rhode Island,

"(JJ) South Pack Plaza, Asheville, North Carolina,

"(KK) Old Louisville Trust Project, Louisville, Kentucky,

"(LL) Stewarts Rehabilitation Project, Louisville, Kentucky,

"(MM) Bernheim Officenter, Louisville, Kentucky,

"(NN) Springville Mill Project, Rockville, Connecticut, and

"(OO) the D.J. Stewart Company Building, State and Main

Streets, Rockford, Illinois.

"(5) Reduction in credit for property under transitional rules. -

In the case of property placed in service after December 31, 1986,

and to which the amendments made by this section [amending this

section and sections 47 and 48 of this title] do not apply,

subparagraph (A) of section 46(b)(4) of the Internal Revenue Code

of 1954 [now 1986] (as in effect before the enactment of this Act)

shall be applied -

"(A) by substituting '10 percent' for '15 percent', and

"(B) by substituting '13 percent' for '20 percent'.

"(6) Expensing of rehabilitation expenses for the frankford

arsenal. - In the case of any expenditures paid or incurred in

connection with improvements (including repairs and maintenance) of

the Frankford Arsenal pursuant to a contract and partnership

agreement during the 8-year period specified in the contract or

agreement, all such expenditures to be made during the period 1986

through and including 1993 shall -

"(A) be treated as made (and allowable as a deduction) during

1986,

"(B) be treated as qualified rehabilitation expenditures made

during 1986, and

"(C) be allocated in accordance with the partnership agreement

regardless of when the interest in the partnership was acquired,

except that -

"(i) if the taxpayer is not the original holder of such

interest, no person (other than the taxpayer) had claimed any

benefits by reason of this paragraph,

"(ii) no interest under section 6611 of the 1986 Code on any

refund of income taxes which is solely attributable to this

paragraph shall be paid for the period -

"(I) beginning on the date which is 45 days after the later

of April 15, 1987, or the date on which the return for such

taxes was filed, and

"(II) ending on the date the taxpayer acquired the interest

in the partnership, and

"(iii) if the expenditures to be made under this provision

are not paid or incurred before January 1, 1994, then the tax

imposed by chapter 1 of such Code for the taxpayer's last

taxable year beginning in 1993 shall be increased by the amount

of the tax benefits by reason of this paragraph which are

attributable to the expenditures not so paid or incurred.

"(7) Special rule. - In the case of the rehabilitation of the

Willard Hotel in Washington, D.C., section 205(c)(1)(B)(ii) of the

Tax Equity and Fiscal Responsibility Act of 1982 [section

205(c)(1)(B)(ii) of Pub. L. 97-248, set out as a note under section

196 of this title] shall be applied by substituting '1987' for

'1986'."

Section 421(c) of Pub. L. 99-514 provided that: "The amendments

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

beginning after December 31, 1985, under rules similar to rules

under section 48(m) of the Internal Revenue Code of 1986."

Amendment by sections 1802(a)(6), (8), 1844(a), (b)(3), (5),

1847(b)(11), 1848(a) of Pub. L. 99-514 effective, except as

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

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

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

under section 48 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by section 16 of Pub. L. 98-369 applicable to taxable

years ending after Dec. 31, 1983, see section 18(a) of Pub. L.

98-369, set out as a note under section 48 of this title.

Amendment by section 31(f) 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 Nov. 5, 1983, in

taxable years ending after such date and to property placed in

service by the taxpayer on or before Nov. 5, 1983, if the lease to

the organization described in section 593 of this title is entered

into after Nov. 5, 1983, see section 31(g)(1), (14) of Pub. L.

98-369, set out as a note under section 168 of this title.

Amendment by section 113(b)(2)(B) of Pub. L. 98-369 applicable as

if included in the amendments by sections 201(a), 211(a)(1), and

211(f)(1) of Pub. L. 97-34, which amended this section and enacted

section 168 of this title, see section 113(c)(2)(B) of Pub. L.

98-369, set out as a note under section 168 of this title.

Section 431(e) of Pub. L. 98-369 provided:

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

this section and sections 47 and 48 of this title] shall apply to

property placed in service after the date of the enactment of this

Act [July 18, 1984] in taxable years ending after such date; except

that such amendments shall not apply to any property to which the

amendments made by section 211(f) of the Economic Recovery Tax Act

of 1981 [section 211(f) of Pub. L. 97-34, amending sections 46 and

47 of this title] do not apply.

"(2) Amendments may be elected retroactively. - At the election

of the taxpayer, the amendments made by this section shall apply as

if included in the amendments made by section 211(f) of the

Economic Recovery Tax Act of 1981. Any election made under the

preceding sentence shall apply to all property of the taxpayer to

which the amendments made by such section 211(f) apply and shall be

made at such time and in such manner as the Secretary of the

Treasury or his delegate may by regulations prescribe."

Amendment by section 474(o)(1)-(7) of Pub. L. 98-369 applicable

to taxable years beginning after Dec. 31, 1983, and to carrybacks

from such years, see section 475(a) of Pub. L. 98-369, set out as a

note under section 21 of this title.

Amendment by section 713 of Pub. L. 98-369 effective as if

included in the provision of the Tax Equity and Fiscal

Responsibility Act of 1982, Pub. L. 97-248, to which such amendment

relates, see section 715 of Pub. L. 98-369, set out as a note under

section 31 of this title.

EFFECTIVE DATE OF 1983 AMENDMENTS

Amendment by section 122(c)(1) of Pub. L. 98-21 applicable to

taxable years beginning after Dec. 31, 1983, except that if an

individual's annuity starting date was deferred under section

105(d)(6) of this title as in effect on the day before Apr. 20,

1983, such deferral shall end on the first day of such individual's

first taxable year beginning after Dec. 31, 1983, see section

122(d) of Pub. L. 98-21, set out as a note under section 22 of this

title.

Amendment by title I of Pub. L. 97-448 effective, except as

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

the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such

amendment relates, see section 109 of Pub. L. 97-448, set out as a

note under section 1 of this title.

Amendment by section 202(f) of Pub. L. 97-448 effective, except

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

of the Crude Oil Windfall Profit Tax Act of 1980, Pub. L. 96-223,

to which such amendment relates, see section 203(a) of Pub. L.

97-448, set out as a note under section 6652 of this title.

Section 541(c) of Pub. L. 97-424, as amended by Pub. L. 99-514,

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

"(1) General rule. - The amendments made by subsections (a) and

(b) [amending this section and sections 167 and 168 of this title]

shall apply to taxable years beginning after December 31, 1979.

"(2) Special rule for periods beginning before march 1, 1980. -

"(A) In general. - Subject to the provisions of paragraphs (3)

and (4), notwithstanding the provisions of sections 167(l) and

46(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]

and of any regulations prescribed by the Secretary of the

Treasury (or his delegate) under such sections, the use for

ratemaking purposes or for reflecting operating results in the

taxpayer's regulated books of account, for any period before

March 1, 1980, of -

"(i) any estimates or projections relating to the amounts of

the taxpayer's tax expense, depreciation expense, deferred tax

reserve, credit allowable under section 38 of such code, or

rate base, or

"(ii) any adjustments to the taxpayer's rate of return,

shall not be treated as inconsistent with the requirements of

subparagraph (G) of such section 167(l)(3) nor inconsistent with

the requirements of paragraph (1) or (2) of such section 46(f),

where such estimates or projections, or such rate of return

adjustments, were included in a qualified order.

"(B) Qualified order defined. - For purposes of this

subsection, the term "qualified order" means an order -

"(i) by a public utility commission which was entered before

March 13, 1980,

"(ii) which used the estimates, projections, or rate of

return adjustments referred to in subparagraph (A) to determine

the amount of the rates to be collected by the taxpayer or the

amount of a refund with respect to rates previously collected,

and

"(iii) which ordered such rates to be collected or refunds to

be made (whether or not such order actually was implemented or

enforced).

"(3) Limitations on application of paragraph (2). -

"(A) Paragraph (2) not to apply to amounts actually flowed

through. - Paragraph (2) shall not apply to the amount of any -

"(i) rate reduction, or

"(ii) refund,

which was actually made pursuant to a qualified order.

"(B) Taxpayer must enter into closing agreement before

paragraph (2) applies. - Paragraph (2) shall not apply to any

taxpayer unless, before the later of -

"(i) July 1, 1983, or

"(ii) 6 months after the refunds or rate reductions are

actually made pursuant to a qualified order.

the taxpayer enters into a closing agreement (within the meaning

of section 7121 of the Internal Revenue Code of 1986) which

provides for the payment by the taxpayer of the amount of which

paragraph (2) does not apply by reason of subparagraph (A).

"(4) Special rules relating to payment of refunds or interest by

the united states or the taxpayer. -

"(A) Refund defined. - For purposes of this subsection, the

term "refund" shall include any credit allowed by the taxpayer

under a qualified order but shall not include interest payable

with respect to any refund (or credit) under such order.

"(B) No interest payable by united states. - No interest shall

be payable under section 6611 of the Internal Revenue Code of

1986 on any overpayment of tax which is attributable to the

application of paragraph (2).

"(C) Payments may be made in two equal installments. -

"(i) In general. - The taxpayer may make any payment required

by reason of paragraph (3) in 2 equal installments, the first

installment being due on the last date on which a taxpayer may

enter into a closing agreement under paragraph (3)(B), and the

second payment being due 1 year after the last date for the

first payment.

"(ii) Interest payments. - For purposes of section 6601 of

such Code, the last date prescribed for payment with respect to

any payment required by reason of paragraph (3) shall be the

last date on which such payment is due under clause (i).

"(5) No inference. - The application of subparagraph (G) of

section 167(l)(3) of the Internal Revenue Code of 1986, and the

application of paragraphs (1) and (2) of section 46(f) of such

Code, to taxable years beginning before January 1, 1980, shall be

determined without any inference drawn from the amendments made by

subsections (a) and (b) of this section [amending this section and

sections 167 and 168 of this title] or from the rules contained in

paragraphs (2), (3), and (4). Nothing in the preceding sentence

shall be construed to limit the relief provided by paragraphs (2),

(3), and (4)."

EFFECTIVE DATE OF 1982 AMENDMENTS

Amendment by Pub. L. 97-354 applicable to taxable years beginning

after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as

an Effective Date note under section 1361 of this title.

Amendment by section 201(d)(8)(A), formerly section 201(c)(8)(A),

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 205(c)(2) of Pub. L. 97-248 provided that: "The

amendments made by subsection (b) [amending this section] shall

apply to taxable years beginning after December 31, 1982."

Amendment by section 265(b)(2)(A)(i) of Pub. L. 97-248 applicable

to distributions after Dec. 31, 1982, see section 265(c)(2) of Pub.

L. 97-248, set out as a note under section 72 of this title.

EFFECTIVE DATE OF 1981 AMENDMENT

Amendment by section 207(c)(1) of Pub. L. 97-34 applicable to

unused credit years ending after Dec. 31, 1973, see section

209(c)(2)(A) of Pub. L. 97-34, set out as an Effective Date note

under section 168 of this title.

Section 211(i) of Pub. L. 97-34 provided that:

"(1) In general. - Except as provided in this subsection, the

amendments made by this section [amending this section and sections

47 and 48 of this title] shall apply to property placed in service

after December 31, 1980.

"(2) Progress expenditures. - The amendments made by subsection

(b) [amending this section] shall apply to progress expenditures

made after December 31, 1980.

"(3) Petroleum storage facilities. - The amendments made by

subsection (c) [amending this section] shall apply to periods after

December 31, 1980, under rules similar to the rules under section

48(m).

"(4) Noncorporate lessors. - The amendments made by subsection

(d) [amending this section] shall apply to leases entered into

after June 25, 1981.

"(5) At risk rules. -

"(A) In general. - The amendment made by subsection (f)

[amending this section and section 47 of this title] shall not

apply to -

"(i) property placed in service by the taxpayer on or before

February 18, 1981, and

"(ii) property placed in service by the taxpayer after

February 18, 1981, where such property is acquired by the

taxpayer pursuant to a binding contract entered into on or

before that date.

"(B) Binding contract. - For purposes of subparagraph (A)(ii),

property acquired pursuant to a binding contract shall, under

regulations prescribed by the Secretary, include property

acquired in a manner so that it would have qualified as

pretermination property under section 49(b) (as in effect before

its repeal by the Revenue Act of 1978) [Pub. L. 95-600].

"(6) Leased rolling stock. - The amendment made by subsection (h)

[amending section 48 of this title] shall apply to taxable years

beginning after December 31, 1980."

Section 212(e) of Pub. L. 97-34, as amended by Pub. L. 97-448,

title I, Sec. 102(f)(1), Jan. 12, 1983, 96 Stat. 2371; Pub. L.

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

"(1) In general. - Except as provided in paragraph (2), the

amendments made by this section [amending this section and sections

48, 57, 167, 280B, 642, 1016, 1082, 1245, and 1250 of this title

and repealing section 191 of this title] shall apply to

expenditures incurred after December 31, 1981, in taxable years

ending after such date.

"(2) Transitional rule. - The amendments made by this section

shall not apply with respect to any rehabilitation of a building if

-

"(A) the physical work on such rehabilitation began before

January 1, 1982, and

"(B) such building does not meet the requirements of paragraph

(1) of section 48(g) of the Internal Revenue Code of 1986

[formerly I.R.C. 1954] (as amended by this Act [Pub. L. 97-34])."

Section 332(c)(1) of Pub. L. 97-34 provided that: "The amendments

made by subsection (a) [amending this section] shall be effective

on the date of enactment of this Act [Aug. 13, 1981]."

EFFECTIVE DATE OF 1980 AMENDMENT

Amendment by section 222(e)(2) of Pub. L. 96-223 applicable to

periods after Dec. 31, 1979, under rules similar to the rules of

section 48(m) of this title, see section 222(j)(1) of Pub. L.

96-223, set out as a note under section 48 of this title.

Section 223(b)(3) of Pub. L. 96-223 provided that: "The

amendments made by this subsection [amending this section and

section 6401 of this title] shall apply to qualified investment for

taxable years beginning after December 31, 1979."

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by section 141(e), (f)(2) of Pub. L. 95-600 effective

with respect to qualified investment for taxable years beginning

after Dec. 31, 1978, see section 141(g)(1) of Pub. L. 95-600, set

out as an Effective Date note under section 409 of this title.

Section 312(d) of Pub. L. 95-600 provided that: "The amendments

made by this section [amending this section and sections 48 and 167

of this title and repealing sections 49 and 50 of this title] shall

apply to taxable years ending after December 31, 1978."

Section 313(b) of Pub. L. 95-600 provided that:

"The amendment made by subsection (a) [amending this section]

shall apply to -

"(1) property acquired by the taxpayer after December 31, 1978,

and

"(2) property the construction, reconstruction, or erection of

which was completed by the taxpayer after December 31, 1978 (but

only to the extent of the basis thereof attributable to

construction, reconstruction, or erection after such date)."

Section 316(c) of Pub. L. 95-600 provided that: "The amendments

made by this section [amending this section and section 1388 of

this title] shall apply to taxable years ending after October 31,

1978."

Section 703(r) of Pub. L. 95-600 provided that: "Except as

otherwise provided, the amendments made by this section [amending

this section and sections 48, 103, 447, 453, 501, 801, 911, 995,

996, 999, 1033, 1212, 1375, 1402, 1561, 4041, 4911, 6104, 6427,

6501, 6504, 6511, 7609 of this title and sections 402, 405, 410,

and 411 of Title 42, The Public Health and Welfare, enacting

provisions set out as notes under sections 103, 311, 443, 501, and

4973 of this title, and amending provisions set out as notes under

section 120, 311, 907, 995, 2011, 2501, and 4940 of this title]

shall take effect on October 4, 1976."

EFFECTIVE DATE OF 1976 AMENDMENT

Amendment by section 503(b)(4) of Pub. L. 94-455 applicable to

taxable years beginning after Dec. 31, 1975, see section 508 of

Pub. L. 94-455, set out as a note under section 3 of this title.

Section 802(c) of Pub. L. 94-455 provided that: "The amendments

made by this section [amending this section and section 48 of this

title and provisions set out below] shall apply to taxable years

beginning after December 31, 1975."

Section 803(j) of Pub. L. 94-455 provided that:

"(1) General rule. - Except as provided in paragraph (2), the

amendments made by this section [see Tables for classification of

section 803 of Pub. L. 94-455] shall apply for taxable years

beginning after December 31, 1974.

"(2) Exceptions. -

"(A) Section 301(e) of the Tax Reduction Act of 1975 [set out

below], as added by subsection (d), shall apply for taxable

years beginning after December 31, 1976.

"(B) The amendments made by subsections (a) and (b)(1) shall

apply for taxable years beginning after December 31, 1975.

"(C) The amendments made by subsections (b)(4) and (f) shall

apply for years beginning after December 31, 1975."

Section 805(b) of Pub. L. 94-455, as amended by Pub. L. 99-514,

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

"(1) In general. - Except as provided in subparagraph (B), the

amendment made by subsection (a) [amending this section] shall

apply to taxable years beginning after December 31, 1975, in the

case of property placed in service after such date.

"(2) Section 46(g)(4). - Section 46(g)(4) of the Internal

Revenue Code of 1986 [formerly I.R.C. 1954] (as added by

subsection (a)) shall apply to taxable years beginning after

December 31, 1975."

Amendment by section 1607(b)(1)(B) of Pub. L. 94-455 applicable

to taxable years ending after Oct. 4, 1976, with certain

exceptions, see section 1608(c) of Pub. L. 94-455, set out as a

note under section 857 of this title.

Amendment by section 1901(a)(4)(A), (B), (b)(1)(C) of Pub. L.

94-455 applicable with respect to taxable years beginning after

Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a

note under section 2 of this title.

Section 2112(d)(1) of Pub. L. 94-455 provided that: "The

amendments made by subsection (a) [amending this section and

section 48 of this title] shall apply to -

"(A) property acquired by the taxpayer after December 31, 1976,

and

"(B) property the construction, reconstruction, or erection of

which was completed by the taxpayer after December 31, 1976, (but

only to the extent of the basis thereof attributable to

construction, reconstruction, or erection after such date), in

taxable years beginning after such date."

EFFECTIVE DATE OF 1975 AMENDMENT

Section 301(b)(4) of Pub. L. 94-12 provided that: "The amendment

made by paragraph (1) of this subsection [amending this section]

shall apply to property placed in service after January 21, 1975,

in taxable years ending after January 21, 1975. The amendments made

by paragraphs (2) and (3) [amending this section] shall apply to

taxable years ending after December 31, 1974."

Section 305(a) of Pub. L. 94-12 provided that: "The amendments

made by section 302 [amending this section and sections 47, 48, and

50B of this title] shall apply to taxable years ending after

December 31, 1974."

EFFECTIVE DATE OF 1974 AMENDMENT

Amendment by section 2001(g)(2)(B) of Pub. L. 93-406 applicable

to distributions made in taxable years beginning after Dec. 31,

1975, see section 2001(i)(5) of Pub. L. 93-406, set out as a note

under section 72 of this title.

Amendment by section 2002(g)(2) of Pub. L. 93-406 effective on

Jan. 1, 1975, see section 2002(i)(2) of Pub. L. 93-406, set out as

an Effective Date note under section 4973 of this title.

Amendment by section 2005(c)(4) of Pub. L. 93-406 applicable only

with respect to distributions or payments made after Dec. 31, 1973,

in taxable years beginning after Dec. 31, 1973, see section 2005(d)

of Pub. L. 93-406, set out as a note under section 402 of this

title.

EFFECTIVE DATE OF 1971 AMENDMENT

Section 102(d)(1), (2) of Pub. L. 92-178, as amended by Pub. L.

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

"(1) The amendments made by subsections (a) and (b) [amending

this section and section 48 of this title] shall apply to property

described in section 50 of the Internal Revenue Code of 1986

[formerly I.R.C. 1954].

"(2) In redetermining qualified investment for purposes of

section 47(a) of the Internal Revenue Code of 1986 in the case of

any property which ceases to be section 38 property with respect to

the taxpayer after August 15, 1971, or which becomes public utility

property after such date, section 46(c)(2) of such Code shall be

applied as amended by subsection (a)."

Section 105(d) of Pub. L. 92-178, as amended by Pub. L. 99-514,

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

amendments made by this section [amending this section and enacting

provisions set out below] shall apply to property described in

section 50 of the Internal Revenue Code of 1986 [formerly I.R.C.

1954]."

Section 106(d) of Pub. L. 92-178 provided that: "The amendments

made by subsections (a), (b), and (c)(2) [amending this section]

shall apply to taxable years beginning after December 31, 1970. The

amendments made by subsection (c)(1) [amending this section] shall

apply to taxable years ending after August 15, 1971."

Section 107(a)(2) of Pub. L. 92-178 provided that: "The repeals

made by paragraph (1) [amending this section and section 47 of this

title] shall apply to casualties and thefts occurring after August

15, 1971."

Section 108(d) of Pub. L. 92-178 provided that: "The amendments

made by subsections (a) and (b) [amending this section and section

48 of this title] shall apply to leases entered into after

September 22, 1971. The amendment made by subsection (c) [amending

section 48 of this title] shall apply to leases entered into after

November 8, 1971."

EFFECTIVE DATE OF 1969 AMENDMENT

Amendment by section 301(b)(4) of Pub. L. 91-172 applicable to

taxable years ending after Dec. 31, 1969, see section 301(c) of

Pub. L. 91-172, set out as a note under section 5 of this title.

Amendment by section 401(e)(1) of Pub. L. 91-172 applicable with

respect to taxable years ending on or after Dec. 31, 1970, see

section 401(h)(3) of Pub. L. 91-172, set out as a note under

section 1561 of this title.

EFFECTIVE DATE OF 1967 AMENDMENT

Section 2(g) of Pub. L. 90-225 provided that: "The amendments

made by this section [amending this section and sections 6411,

6501, 6511, 6601, and 6611 of this title] shall apply with respect

to investment credit carrybacks attributable to net operating loss

carrybacks from taxable years ending after July 31, 1967."

EFFECTIVE DATE OF 1966 AMENDMENTS

Section 4 of Pub. L. 89-800 provided that: "The amendments made

by this Act [amending this section and sections 48 and 167 of this

title] shall apply to taxable years ending after October 9, 1966,

except that the amendments made by section 3(b) [amending this

section] shall apply only if the fifth taxable year following the

unused credit year ends after December 31, 1966."

Section 2(c) of Pub. L. 89-389 provided that: "The amendments

made by this section [enacting section 1378 of this title and

amending this section and sections 1372, 1373, and 1375 of this

title] shall apply with respect to taxable years of electing small

business corporations beginning after the date of enactment of this

Act [Apr. 14, 1966], but such amendments shall not apply with

respect to sales or exchanges occurring before February 24, 1966."

Amendment by Pub. L. 89-384 applicable with respect to amounts

received after December 31, 1964, in respect of foreign

expropriation losses (as defined in section 1351(b) of this title)

sustained after December 31, 1958, see section 2 of Pub. L. 89-384,

set out as an Effective Date note under section 1351 of this title.

EFFECTIVE DATE OF 1964 AMENDMENT

Amendment by Pub. L. 88-272 applicable with respect to dividends

received after Dec. 31, 1964, in taxable years ending after such

date, see section 201(e) of Pub. L. 88-272, set out as a note under

section 22 of this title.

EFFECTIVE DATE

Section 2(h) of Pub. L. 87-834 provided that: "The amendments

made by this section [enacting this section and sections 38, 47,

48, and 181 of this title, amending sections 381, 1016, 6501, 6511,

6601, and 6611 of this title, and renumbering former section 38 as

section 39 of this title] shall apply with respect to taxable years

ending after December 31, 1961."

SAVINGS PROVISION

For provisions that nothing in amendment by section 11813(a) 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.

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.

CLARIFICATION OF EFFECT OF 1984 AMENDMENT ON INVESTMENT TAX CREDIT

Section 475(c) of Pub. L. 98-369 provided that: "Nothing in the

amendments made by section 474(o) [amending this section and

sections 47 and 48 of this title] shall be construed as reducing

the amount of any credit allowable for qualified investment in

taxable years beginning before January 1, 1984."

REGULATED PUBLIC UTILITIES; SPECIAL TRANSITIONAL RULE

Section 209(d)(2) of Pub. L. 97-34, as amended by Pub. L. 99-514,

Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If, by the

terms of the applicable rate order last entered before the date of

the enactment of this Act [Aug. 13, 1981] by a regulatory

commission having appropriate jurisdiction, a regulated public

utility would (but for this provision) fail to meet the

requirements of paragraph (1) or (2) of section 46(f) of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954] with respect

to property for an accounting period ending after December 31,

1980, such regulated public utility shall not fail to meet such

requirements if, by the terms of its first rate order determining

cost of service with respect to such property which becomes

effective after the date of the enactment of this Act and on or

before January 1, 1983, such regulated public utility meets such

requirements. This provision shall not apply to any rate order

which, under the rules in effect before the date of the enactment

of this Act was inconsistent with the requirements of paragraph (1)

or (2) of section 46(f) of such Code (whichever would have been

applicable)."

PLAN REQUIREMENTS FOR TAXPAYERS ELECTING ADDITIONAL CREDITS

Section 301(d), (e), (f) of Pub. L. 94-12, as amended by Pub. L.

94-455, Secs. 802(b)(7), 803(c), (d), (e), relating to plan

requirements for taxpayers electing additional credit, was repealed

by Pub. L. 95-600, title I, Sec. 141(f)(1), Nov. 6, 1978, 92 Stat.

2795.

PUBLIC UTILITY PROPERTY SUBJECT TO SUBSEC. (E); PROVISIONS

RESPECTING TREATMENT OF INVESTMENT CREDIT BY FEDERAL REGULATORY

AGENCIES INAPPLICABLE

Section 105(e) of Pub. L. 92-178, as amended by Pub. L. 99-514,

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

203(e) of the Revenue Act of 1964 [set out as note under section 38

of this title] shall not apply to public utility property to which

section 46(e) of the Internal Revenue Code of 1986 [formerly I.R.C.

1954] (as added by subsection (c)) [subsec. (e) of this section]

applies."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 38, 47, 48, 49, 50, 52,

111, 196 of this title.

-End-

-CITE-

26 USC Sec. 47 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

Sec. 47. Rehabilitation credit

-STATUTE-

(a) General rule

For purposes of section 46, the rehabilitation credit for any

taxable year is the sum of -

(1) 10 percent of the qualified rehabilitation expenditures

with respect to any qualified rehabilitated building other than a

certified historic structure, and

(2) 20 percent of the qualified rehabilitation expenditures

with respect to any certified historic structure.

(b) When expenditures taken into account

(1) In general

Qualified rehabilitation expenditures with respect to any

qualified rehabilitated building shall be taken into account for

the taxable year in which such qualified rehabilitated building

is placed in service.

(2) Coordination with subsection (d)

The amount which would (but for this paragraph) be taken into

account under paragraph (1) with respect to any qualified

rehabilitated building shall be reduced (but not below zero) by

any amount of qualified rehabilitation expenditures taken into

account under subsection (d) by the taxpayer or a predecessor of

the taxpayer (or, in the case of a sale and leaseback described

in section 50(a)(2)(C), by the lessee), to the extent any amount

so taken into account has not been required to be recaptured

under section 50(a).

(c) Definitions

For purposes of this section -

(1) Qualified rehabilitated building

(A) In general

The term "qualified rehabilitated building" means any

building (and its structural components) if -

(i) such building has been substantially rehabilitated,

(ii) such building was placed in service before the

beginning of the rehabilitation,

(iii) in the case of any building other than a certified

historic structure, in the rehabilitation process -

(I) 50 percent or more of the existing external walls of

such building are retained in place as external walls,

(II) 75 percent or more of the existing external walls of

such building are retained in place as internal or external

walls, and

(III) 75 percent or more of the existing internal

structural framework of such building is retained in place,

and

(iv) depreciation (or amortization in lieu of depreciation)

is allowable with respect to such building.

(B) Building must be first placed in service before 1936

In the case of a building other than a certified historic

structure, a building shall not be a qualified rehabilitated

building unless the building was first placed in service before

1936.

(C) Substantially rehabilitated defined

(i) In general

For purposes of subparagraph (A)(i), a building shall be

treated as having been substantially rehabilitated only if

the qualified rehabilitation expenditures during the 24-month

period selected by the taxpayer (at the time and in the

manner prescribed by regulation) and ending with or within

the taxable year exceed the greater of -

(I) the adjusted basis of such building (and its

structural components), or

(II) $5,000.

The adjusted basis of the building (and its structural

components) shall be determined as of the beginning of the

1st day of such 24-month period, or of the holding period of

the building, whichever is later. For purposes of the

preceding sentence, the determination of the beginning of the

holding period shall be made without regard to any

reconstruction by the taxpayer in connection with the

rehabilitation.

(ii) Special rule for phased rehabilitation

In the case of any rehabilitation which may reasonably be

expected to be completed in phases set forth in architectural

plans and specifications completed before the rehabilitation

begins, clause (i) shall be applied by substituting "60-month

period" for "24-month period".

(iii) Lessees

The Secretary shall prescribe by regulation rules for

applying this subparagraph to lessees.

(D) Reconstruction

Rehabilitation includes reconstruction.

(2) Qualified rehabilitation expenditure defined

(A) In general

The term "qualified rehabilitation expenditure" means any

amount properly chargeable to capital account -

(i) for property for which depreciation is allowable under

section 168 and which is -

(I) nonresidential real property,

(II) residential rental property,

(III) real property which has a class life of more than

12.5 years, or

(IV) an addition or improvement to property described in

subclause (I), (II), or (III), and

(ii) in connection with the rehabilitation of a qualified

rehabilitated building.

(B) Certain expenditures not included

The term "qualified rehabilitation expenditure" does not

include -

(i) Straight line depreciation must be used

Any expenditure with respect to which the taxpayer does not

use the straight line method over a recovery period

determined under subsection (c) or (g) of section 168. The

preceding sentence shall not apply to any expenditure to the

extent the alternative depreciation system of section 168(g)

applies to such expenditure by reason of subparagraph (B) or

(C) of section 168(g)(1).

(ii) Cost of acquisition

The cost of acquiring any building or interest therein.

(iii) Enlargements

Any expenditure attributable to the enlargement of an

existing building.

(iv) Certified historic structure, etc.

Any expenditure attributable to the rehabilitation of a

certified historic structure or a building in a registered

historic district, unless the rehabilitation is a certified

rehabilitation (within the meaning of subparagraph (C)). The

preceding sentence shall not apply to a building in a

registered historic district if -

(I) such building was not a certified historic structure,

(II) the Secretary of the Interior certified to the

Secretary that such building is not of historic

significance to the district, and

(III) if the certification referred to in subclause (II)

occurs after the beginning of the rehabilitation of such

building, the taxpayer certifies to the Secretary that, at

the beginning of such rehabilitation, he in good faith was

not aware of the requirements of subclause (II).

(v) Tax-exempt use property

(I) In general

Any expenditure in connection with the rehabilitation of

a building which is allocable to the portion of such

property which is (or may reasonably be expected to be)

tax-exempt use property (within the meaning of section

168(h)).

(II) Clause not to apply for purposes of paragraph (1)(C)

This clause shall not apply for purposes of determining

under paragraph (1)(C) whether a building has been

substantially rehabilitated.

(vi) Expenditures of lessee

Any expenditure of a lessee of a building if, on the date

the rehabilitation is completed, the remaining term of the

lease (determined without regard to any renewal periods) is

less than the recovery period determined under section

168(c).

(C) Certified rehabilitation

For purposes of subparagraph (B), the term "certified

rehabilitation" means any rehabilitation of a certified

historic structure which the Secretary of the Interior has

certified to the Secretary as being consistent with the

historic character of such property or the district in which

such property is located.

(D) Nonresidential real property; residential rental property;

class life

For purposes of subparagraph (A), the terms "nonresidential

real property," "residential rental property," and "class life"

have the respective meanings given such terms by section 168.

(3) Certified historic structure defined

(A) In general

The term "certified historic structure" means any building

(and its structural components) which -

(i) is listed in the National Register, or

(ii) is located in a registered historic district and is

certified by the Secretary of the Interior to the Secretary

as being of historic significance to the district.

(B) Registered historic district

The term "registered historic district" means -

(i) any district listed in the National Register, and

(ii) any district -

(I) which is designated under a statute of the

appropriate State or local government, if such statute is

certified by the Secretary of the Interior to the Secretary

as containing criteria which will substantially achieve the

purpose of preserving and rehabilitating buildings of

historic significance to the district, and

(II) which is certified by the Secretary of the Interior

to the Secretary as meeting substantially all of the

requirements for the listing of districts in the National

Register.

(d) Progress expenditures

(1) In general

In the case of any building to which this subsection applies,

except as provided in paragraph (3) -

(A) if such building is self-rehabilitated property, any

qualified rehabilitation expenditure with respect to such

building shall be taken into account for the taxable year for

which such expenditure is properly chargeable to capital

account with respect to such building, and

(B) if such building is not self-rehabilitated property, any

qualified rehabilitation expenditure with respect to such

building shall be taken into account for the taxable year in

which paid.

(2) Property to which subsection applies

(A) In general

This subsection shall apply to any building which is being

rehabilitated by or for the taxpayer if -

(i) the normal rehabilitation period for such building is 2

years or more, and

(ii) it is reasonable to expect that such building will be

a qualified rehabilitated building in the hands of the

taxpayer when it is placed in service.

Clauses (i) and (ii) shall be applied on the basis of facts

known as of the close of the taxable year of the taxpayer in

which the rehabilitation begins (or, if later, at the close of

the first taxable year to which an election under this

subsection applies).

(B) Normal rehabilitation period

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

rehabilitation period" means the period reasonably expected to

be required for the rehabilitation of the building -

(i) beginning with the date on which physical work on the

rehabilitation begins (or, if later, the first day of the

first taxable year to which an election under this subsection

applies), and

(ii) ending on the date on which it is expected that the

property will be available for placing in service.

(3) Special rules for applying paragraph (1)

For purposes of paragraph (1) -

(A) Component parts, etc.

Property which is to be a component part of, or is otherwise

to be included in, any building to which this subsection

applies shall be taken into account -

(i) at a time not earlier than the time at which it becomes

irrevocably devoted to use in the building, and

(ii) as if (at the time referred to in clause (i)) the

taxpayer had expended an amount equal to that portion of the

cost to the taxpayer of such component or other property

which, for purposes of this subpart, is properly chargeable

(during such taxable year) to capital account with respect to

such building.

(B) Certain borrowing disregarded

Any amount borrowed directly or indirectly by the taxpayer

from the person rehabilitating the property for him shall not

be treated as an amount expended for such rehabilitation.

(C) Limitation for buildings which are not self-rehabilitated

(i) In general

In the case of a building which is not self-rehabilitated,

the amount taken into account under paragraph (1)(B) for any

taxable year shall not exceed the amount which represents the

portion of the overall cost to the taxpayer of the

rehabilitation which is properly attributable to the portion

of the rehabilitation which is completed during such taxable

year.

(ii) Carryover of certain amounts

In the case of a building which is not a self-rehabilitated

building, if for the taxable year -

(I) the amount which (but for clause (i)) would have been

taken into account under paragraph (1)(B) exceeds the

limitation of clause (i), then the amount of such excess

shall be taken into account under paragraph (1)(B) for the

succeeding taxable year, or

(II) the limitation of clause (i) exceeds the amount

taken into account under paragraph (1)(B), then the amount

of such excess shall increase the limitation of clause (i)

for the succeeding taxable year.

(D) Determination of percentage of completion

The determination under subparagraph (C)(i) of the portion of

the overall cost to the taxpayer of the rehabilitation which is

properly attributable to rehabilitation completed during any

taxable year shall be made, under regulations prescribed by the

Secretary, on the basis of engineering or architectural

estimates or on the basis of cost accounting records. Unless

the taxpayer establishes otherwise by clear and convincing

evidence, the rehabilitation shall be deemed to be completed

not more rapidly than ratably over the normal rehabilitation

period.

(E) No progress expenditures for certain prior periods

No qualified rehabilitation expenditures shall be taken into

account under this subsection for any period before the first

day of the first taxable year to which an election under this

subsection applies.

(F) No progress expenditures for property for year it is placed

in service, etc.

In the case of any building, no qualified rehabilitation

expenditures shall be taken into account under this subsection

for the earlier of -

(i) the taxable year in which the building is placed in

service, or

(ii) the first taxable year for which recapture is required

under section 50(a)(2) with respect to such property,

or for any taxable year thereafter.

(4) Self-rehabilitated building

For purposes of this subsection, the term "self-rehabilitated

building" means any building if it is reasonable to believe that

more than half of the qualified rehabilitation expenditures for

such building will be made directly by the taxpayer.

(5) Election

This subsection shall apply to any taxpayer only if such

taxpayer has made an election under this paragraph. Such an

election shall apply to the taxable year for which made and all

subsequent taxable years. Such an election, once made, may be

revoked only with the consent of the Secretary.

-SOURCE-

(Added Pub. L. 87-834, Sec. 2(b), Oct. 16, 1962, 76 Stat. 966;

amended Pub. L. 91-172, title VII, Sec. 703(c), Dec. 30, 1969, 83

Stat. 666; Pub. L. 91-676, Sec. 1, Jan. 12, 1971, 84 Stat. 2060;

Pub. L. 92-178, title I, Secs. 102(c), 107(a)(1), (b)(1), Dec. 10,

1971, 85 Stat. 500, 507; Mar. 29, 1975, Pub. L. 94-12, title III,

Sec. 302(b)(2)(A), (c)(1), (2), 89 Stat. 43, 44; Pub. L. 94-455,

title VIII, Sec. 804(b), title XIX, Sec. 1906(b)(13)(A), Oct. 4,

1976, 90 Stat. 1594, 1834; Pub. L. 95-600, title III, Sec. 317(a),

Nov. 6, 1978, 92 Stat. 2830; Pub. L. 95-618, title II, Sec. 241(b),

Nov. 9, 1978, 92 Stat. 3193; Pub. L. 97-34, title II, Sec.

211(f)(2), (g), Aug. 13, 1981, 95 Stat. 231, 233; Pub. L. 97-248,

title II, Sec. 208(a)(2)(B), Sept. 3, 1982, 96 Stat. 435; Pub. L.

97-448, title I, Sec. 102(e)(3), Jan. 12, 1983, 96 Stat. 2371; Pub.

L. 98-369, div. A, title IV, Secs. 421(b)(7), 431(b)(2), (d)(4),

(5), 474(o)(8), (9), July 18, 1984, 98 Stat. 794, 807, 810, 836;

Pub. L. 98-443, Sec. 9(p), Oct. 4, 1984, 98 Stat. 1708; Pub. L.

99-121, title I, Sec. 103(b)(6), Oct. 11, 1985, 99 Stat. 510; Pub.

L. 99-514, title XV, Sec. 1511(c)(2), title XVIII, Secs.

1802(a)(5)(A), 1844(b)(1), (2), (4), Oct. 22, 1986, 100 Stat. 2744,

2788, 2855; Pub. L. 100-647, title I, Secs. 1002(a)(18), (26)-(28),

1007(g)(3)(A), Nov. 10, 1988, 102 Stat. 3356, 3357, 3435; Pub. L.

101-508, title XI, Sec. 11801(c)(8)(A), 11813(a), Nov. 5, 1990, 104

Stat. 1388-524, 1388-536.)

-MISC1-

AMENDMENTS

1990 - Pub. L. 101-508, Sec. 11813(a), amended section generally,

substituting section catchline for one which read: "Certain

dispositions, etc., of section 38 property" and in text

substituting present provisions for provisions relating to general

rules regarding disposition of section 38 property,

nonapplicability of section in certain cases, the treatment of any

increase in tax under the section, increases in nonqualified

nonrecourse financing, and transfers between spouses or incident to

divorce.

Subsec. (b)(1) to (3). Pub. L. 101-508, Sec. 11801(c)(8)(A),

inserted "or" at end of par. (1), substituted a period for ", or"

at end of par. (2), and struck out par. (3) which related to

nonapplicability of subsec. (a) in the case of a transfer of

section 38 property related to exchanges under final system plan

for ConRail.

1988 - Subsec. (a)(5)(D). Pub. L. 100-647, Sec. 1002(a)(26)(B),

struck out at end "If, prior to a disposition to which this

subsection applies, any portion of any credit is not allowable with

respect to any property by reason of section 168(i)(3), such

portion shall be treated (for purposes of this subparagraph) as not

having been used to reduce tax liability."

Subsec. (a)(5)(E)(iii). Pub. L. 100-647, Sec. 1002(a)(26)(C),

substituted "168(e)" for "168(c)".

Subsec. (a)(5)(E)(v). Pub. L. 100-647, Sec. 1002(a)(26)(A), added

cl. (v).

Subsec. (a)(9)(A). Pub. L. 100-647, Sec. 1002(a)(27), substituted

"section 168(h)(2)" for "section 168(j)(4)(C)".

Subsec. (c). Pub. L. 100-647, Sec. 1007(g)(3)(A), substituted "D,

or G" for "or D".

Subsec. (d)(1). Pub. L. 100-647, Sec. 1002(a)(18), substituted

"section 46(c)(8)(C)" for "section 48(c)(8)(C)".

Subsec. (d)(3)(C)(i). Pub. L. 100-647, Sec. 1002(a)(28),

substituted "class life (as defined in section 168(i)(1))" for

"present class life (as defined in section 168(g)(2))" and "no

class life" for "no present class life".

1986 - Subsec. (a)(9). Pub. L. 99-514, Sec. 1802(a)(5)(A), added

par. (9).

Subsec. (d)(1). Pub. L. 99-514, Sec. 1844(b)(1), substituted

"reducing the credit base (as defined in section 48(c)(8)(C))" for

"reducing the qualified investment" and inserted "For purposes of

determining the amount of credit subject to the early disposition

or cessation rules of subsection (a), the net increase in the

amount of the nonqualified nonrecourse financing with respect to

the property shall be treated as reducing the property's credit

base (and correspondingly reducing the qualified investment in the

property) in the year in which the property was first placed in

service."

Subsec. (d)(3)(E)(i). Pub. L. 99-514, Sec. 1844(b)(4), inserted

"reduced by the sum of the credit recapture amounts with respect to

such property for all preceding years".

Subsec. (d)(3)(F). Pub. L. 99-514, Sec. 1844(b)(2), struck out

subpar. (F) which read as follows: "The amount of any increase in

tax under subsection (a) with respect to any property to which this

paragraph applies shall be determined by reducing the qualified

investment with respect to such property by the aggregate credit

recapture amounts for all taxable years under this paragraph."

Subsec. (d)(3)(G). Pub. L. 99-514, Sec. 1511(c)(2), substituted

"determined at the underpayment rate established under section

6621" for "determined under section 6621".

1985 - Subsec. (a)(5)(B). Pub. L. 99-121 substituted "For

property other than 3-year property" for "For 15-year, 10-year, and

5-year property" in table heading.

1984 - Subsec. (a)(5)(D), (6). Pub. L. 98-369, Sec. 474(o)(8),

substituted "under section 39" for "under section 46(b)".

Subsec. (a)(7)(C). Pub. L. 98-443 substituted "Secretary of

Transportation" for "Civil Aeronautics Board".

Subsec. (c). Pub. L. 98-369, Sec. 474(o)(9), substituted "subpart

A, B, or D" for "subpart A".

Subsec. (d). Pub. L. 98-369, Sec. 431(b)(2), substituted

"Increases in nonqualified nonrecourse financing" for "Property

ceasing to be at risk" in heading.

Subsec. (d)(1). Pub. L. 98-369, Sec. 431(b)(2), substituted

provisions relating to increases in tax liability resulting from

increases in nonqualified nonrecourse financing for provisions

relating to increases in tax liability resulting from the taxpayer

ceasing to be at risk with respect to certain property.

Subsec. (d)(2). Pub. L. 98-369, Sec. 431(b)(2), substituted

provisions that for purposes of par. (1), transfers of debt, or

agreements to transfer, occurring more than one year after the

initial borrowing shall not be treated as increasing nonqualified

nonrecourse financing with respect to the taxpayer for provisions

that for purposes of par. (1), such transfers (or agreements to

transfer) by a qualified person to a nonqualified person would not

cause the taxpayer to be treated as ceasing to be at risk.

Subsec. (d)(3)(A). Pub. L. 98-369, Sec. 431(d)(4), substituted

"increasing the amount of nonqualified nonrecourse financing

(within the meaning of section 46(c)(8))" for "ceasing to be at

risk".

Subsec. (d)(3)(B)(i). Pub. L. 98-369, Sec. 431(d)(5), struck out

"other than a loan described in section 46(c)(8)(B)(ii)" after

"section 46(c)(8)(F)(iv)".

Subsec. (e). Pub. L. 98-369, Sec. 421(b)(7), added subsec. (e).

1983 - Subsec. (d)(2). Pub. L. 97-448, Sec. 102(e)(3)(A),

substituted "section 46(c)(8)(D)" and "section 46(c)(8)(B)" for

"section 48(c)(8)(D)" and "section 48(c)(8)(B)", respectively.

Subsec. (d)(3)(A). Pub. L. 97-448, Sec. 102(e)(3)(B), substituted

"section 46(c)(8)(F)" for "section 46(c)(8)(E)".

1982 - Subsec. (a)(5)(D). Pub. L. 97-248, Sec. 208(a)(2)(B),

inserted provision that if, prior to a disposition to which this

subsection applies, any portion of any credit is not allowable with

respect to any property by reason of section 168(i)(3), such

portion shall be treated, for purposes of this subparagraph, as not

having been used to reduce tax liability.

1981 - Subsec. (a)(3)(D). Pub. L. 97-34, Sec. 211(g)(2)(A),

inserted provisions relating to disposition, cessation, or change

in expected use described in paragraph (5).

Subsec. (a)(5), (6). Pub. L. 97-34, Sec. 211(g)(1), (2)(B), added

par. (5), redesignated former par. (5) as (6) and substituted

"paragraph (1), (3), or (5)" for "paragraph (1) or (3)". Former

par. (6) redesignated (7).

Subsec. (a)(7), (8). Pub. L. 97-34, Sec. 211(g)(1), (2)(C),

redesignated former par. (6) as (7), substituted "paragraph (6)"

for "paragraph (5)", and redesignated former par. (7) as (8).

Subsec. (d). Pub. L. 97-34, Sec. 211(f)(2), added subsec. (d).

1978 - Subsec. (a)(4), (5). Pub. L. 95-618, Sec. 241(b)(1), added

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

"paragraph (2) or (4)" for "paragraph (2)".

Subsec. (a)(6)(B). Pub. L. 95-618, Sec. 241(b)(3), substituted

"paragraph (5)" for "paragraph (4)".

Subsec. (b)(3). Pub. L. 95-600, Sec. 317(a), added par. (3).

1976 - Subsec. (a). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck

out in introductory provision and in par. (3)(C) "or his delegate"

after "Secretary".

Subsec. (a)(7). Pub. L. 94-455, Sec. 804(b), added par. (7).

1975 - Subsec. (a)(3), (4). Pub. L. 94-12, Sec. 302(b)(2)(A),

(c)(1), added par. (3), redesignated former par. (3) as (4) and

substituted "paragraph (1) or (3)" for "paragraph (1)". A former

par. (4), relating to increase or adjustment of tax where property

is destroyed by casualty, etc., was repealed by Pub. L. 92-178.

Subsec. (a)(5), (6)(B). Pub. L. 94-12, Sec. 302(c)(2),

substituted "paragraph (4)" for "paragraph (3)".

1971 - Subsec. (a)(4). Pub. L. 92-178, Sec. 107(a)(1), struck out

par. (4) relating to property destroyed by casualty, etc.

Subsec. (a)(5). Pub. L. 92-178, Sec. 107(b)(1), provided for the

repeal of par. (5) with the repeal not to apply, however, in the

case of certain replacement property. See section 107(b)(2) of Pub.

L. 92-178, set out in the Effective Date of 1971 Amendment note

below.

Subsec. (a)(6)(A). Pub. L. 92-178, Sec. 102(c), substituted "3

1/2 years" for "4 years".

Subsec. (a)(6). Pub. L. 91-676 added par. (6).

1969 - Subsec. (a)(5). Pub. L. 91-172, Sec. 703(c)(2), added par.

(5).

Subsec. (a)(4). Pub. L. 91-172, Sec. 703(c)(1), inserted

provision making subpars. (B) and (C) inapplicable to any casualty

or theft occurring after April 18, 1969.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by section 11813(a) of Pub. L. 101-508 applicable to

property placed in service after Dec. 31, 1990, but not applicable

to any transition property (as defined in section 49(e) of this

title), any property with respect to which qualified progress

expenditures were previously taken into account under section 46(d)

of this title, and any property described in section 46(b)(2)(C) of

this title, as such sections were in effect on Nov. 4, 1990, see

section 11813(c) of Pub. L. 101-508, set out as a note under

section 29 of this title.

EFFECTIVE DATE OF 1988 AMENDMENT

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

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

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

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

this title.

EFFECTIVE DATE OF 1986 AMENDMENT

Section 1511(d) of Pub. L. 99-514 provided that: "The amendments

made by this section [amending this section and sections 48, 167,

644, 852, 4497, 6214, 6332, 6343, 6601, 6602, 6611, 6621, 6654,

6655, and 7426 of this title and sections 1961 and 2411 of Title

28, Judiciary and Judicial Procedure, and enacting provisions set

out as a note under section 6621 of this title] shall apply for

purposes of determining interest for periods after December 31,

1986."

Amendment by sections 1802(a)(5)(A) and 1844(b)(1), (2), (4) of

Pub. L. 99-514 effective, except as otherwise provided, as if

included in the provisions of the Tax Reform Act of 1984, Pub. L.

98-369, div. A, to which such amendment relates, see section 1881

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

title.

EFFECTIVE DATE OF 1985 AMENDMENT

Amendment by Pub. L. 99-121 applicable as if included in the

amendments made by section 111 of the Tax Reform Act of 1984, Pub.

L. 98-369, see section 105(b)(4) of Pub. L. 99-121, set out as a

note under section 168 of this title, and section 111(g) of Pub. L.

98-369, set out as an Effective Date of 1984 Amendment note under

section 168 of this title.

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 421(b)(7) of Pub. L. 98-369 applicable to

transfers after July 18, 1984, in taxable years ending after such

date, subject to election to have amendment apply to transfers

after 1983 or to transfers pursuant to existing decrees, see

section 421(d) of Pub. L. 98-369, set out as an Effective Date note

under section 1041 of this title.

Amendment by section 431(b)(2), (d)(4), (5) of Pub. L. 98-369

applicable to property placed in service after July 18, 1984, in

taxable years ending after such date, but not applicable to

property to which subsec. (d) of this section and section 46(c)(8),

(9) of this title, as enacted by section 211(f) of Pub. L. 97-34,

do not apply, with the taxpayer having an option to elect

retroactive application of amendment by Pub. L. 98-369, see section

431(e) of Pub. L. 98-369, set out as a note under section 46 of

this title.

Amendment by section 474(o)(8), (9) of Pub. L. 98-369 applicable

to taxable years beginning after Dec. 31, 1983, and to carrybacks

from such years, see section 475(a) of Pub. L. 98-369, set out as a

note under section 21 of this title.

EFFECTIVE DATE OF 1983 AMENDMENT

Amendment by Pub. L. 97-448 effective, except as otherwise

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

Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such

amendment relates, see section 109 of Pub. L. 97-448, set out as a

note under section 1 of this title.

EFFECTIVE DATE OF 1982 AMENDMENT

Amendment by Pub. L. 97-248 applicable to agreements entered into

after July 1, 1982, or to property placed in service after that

date, but not to transitional safe harbor lease property, nor to

qualified leased property described in section 168(f)(8)(D)(v) of

this title which is placed in service before Jan. 1, 1988, or is

placed in service after such date pursuant to a binding contract or

commitment entered into before April 1, 1983, and solely because of

conditions which, as determined by the Secretary of the Treasury or

his delegate, are not within the control of the lessor or lessee,

see section 208(d)(1), (2)(A), (5) of Pub. L. 97-248, set out as a

note under section 168 of this title.

EFFECTIVE DATE OF 1981 AMENDMENT

Amendment by section 211(g) of Pub. L. 97-34 applicable to

property placed in service after Dec. 31, 1980, see section

211(i)(1) of Pub. L. 97-34, set out in a note under section 46 of

this title.

Amendment by section 211(f)(2) of Pub. L. 97-34 not to apply to

property placed in service by the taxpayer on or before Feb. 18,

1981, and property placed in service by the taxpayer after Feb. 18,

1981, where such property was acquired by the taxpayer pursuant to

a binding contract entered into on or before that date, see section

211(i)(5) of Pub. L. 97-34, set out as a note under section 46 of

this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Section 317(b) of Pub. L. 95-600 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

taxable years ending after March 31, 1976."

EFFECTIVE DATE OF 1976 AMENDMENT

Amendment by section 804(b) of Pub. L. 94-455 applicable to

taxable years beginning after Dec. 31, 1974, see section 804(e) of

Pub. L. 94-455, set out as a note under section 48 of this title.

EFFECTIVE DATE OF 1975 AMENDMENT

Amendment by Pub. L. 94-12 applicable to taxable years ending

after Dec. 31, 1974, see section 305(a) of Pub. L. 94-12, set out

as a note under section 46 of this title.

EFFECTIVE DATE OF 1971 AMENDMENTS

In redetermining qualified investment for purposes of subsec. (a)

of this section in the case of any property which ceases to be

section 38 property with respect to the taxpayer after Aug. 15,

1971, or which becomes public utility property after such date,

section 46(c)(2) of this title as amended by section 102(a) of Pub.

L. 92-178 as applicable, see section 102(d)(2) of Pub. L. 92-178,

set out as a note under section 46 of this title.

Amendment by section 107(a)(1) of Pub. L. 92-178 applicable to

casualties and thefts occurring after Aug. 15, 1971, see section

107(a)(2) of Pub. L. 92-178, set out as a note under section 46 of

this title.

Section 107(b)(2) of Pub. L. 92-178, as amended by Pub. L.

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

repeal made by paragraph (1) [repealing subsec. (a)(5) of this

section] shall not apply if replacement property described in

subparagraph (B) of such section 47(a)(5) is not property described

in section 50 of the Internal Revenue Code of 1986 [formerly I.R.C.

1954]."

Section 102(d)(3) of Pub. L. 92-178 provided that: "The amendment

made by subsection (c) [amending this section] shall apply to

leases executed after April 18, 1969."

Section 2 of Pub. L. 91-676 provided that: "The amendment made by

the first section of this Act [amending this section] shall apply

to taxable years ending after April 18, 1969."

EFFECTIVE DATE

Section applicable with respect to taxable years ending after

Dec. 31, 1961, see section 2(h) of Pub. L. 87-834, set out as a

note under section 46 of this title.

SAVINGS PROVISION

For provisions that nothing in amendment by 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.

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.

CLARIFICATION OF EFFECT OF 1984 AMENDMENT ON INVESTMENT TAX CREDIT

For provision that nothing in the amendments made by section

474(o) of Pub. L. 98-369, which amended this section, be construed

as reducing the investment tax credit in taxable years beginning

before Jan. 1, 1984, see section 475(c) of Pub. L. 98-369, set out

as a note under section 46 of this title.

-TRANS-

TRANSFER OF FUNCTIONS

Functions, powers, and duties of Federal Aviation Agency and of

Administrator and other offices and officers thereof transferred by

Pub. L. 89-670, Oct. 15, 1966, 80 Stat. 931, to Secretary of

Transportation, with functions, powers, and duties of Secretary of

Transportation pertaining to aviation safety to be exercised by

Federal Aviation Administrator in Department of Transportation, see

section 106 of Title 49, Transportation.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 49, 50, 170, 469, 772,

1400I of this title.

-End-

-CITE-

26 USC Sec. 48 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

Sec. 48. Energy credit; reforestation credit

-STATUTE-

(a) Energy credit

(1) In general

For purposes of section 46, the energy credit for any taxable

year is the energy percentage of the basis of each energy

property placed in service during such taxable year.

(2) Energy percentage

(A) In general

The energy percentage is 10 percent.

(B) Coordination with rehabilitation credit

The energy percentage shall not apply to that portion of the

basis of any property which is attributable to qualified

rehabilitation expenditures.

(3) Energy property

For purposes of this subpart, the term "energy property" means

any property -

(A) which is -

(i) equipment which uses solar energy to generate

electricity, to heat or cool (or provide hot water for use

in) a structure, or to provide solar process heat, or

(ii) equipment used to produce, distribute, or use energy

derived from a geothermal deposit (within the meaning of

section 613(e)(2)), but only, in the case of electricity

generated by geothermal power, up to (but not including) the

electrical transmission stage,

(B)(i) the construction, reconstruction, or erection of which

is completed by the taxpayer, or

(ii) which is acquired by the taxpayer if the original use of

such property commences with the taxpayer,

(C) with respect to which depreciation (or amortization in

lieu of depreciation) is allowable, and

(D) which meets the performance and quality standards (if

any) which -

(i) have been prescribed by the Secretary by regulations

(after consultation with the Secretary of Energy), and

(ii) are in effect at the time of the acquisition of the

property.

The term "energy property" shall not include any property which

is public utility property (as defined in section 46(f)(5) as in

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

Reconciliation Act of 1990).

(4) Special rule for property financed by subsidized energy

financing or industrial development bonds

(A) Reduction of basis

For purposes of applying the energy percentage to any

property, if such property is financed in whole or in part by -

(i) subsidized energy financing, or

(ii) the proceeds of a private activity bond (within the

meaning of section 141) the interest on which is exempt from

tax under section 103,

the amount taken into account as the basis of such property

shall not exceed the amount which (but for this subparagraph)

would be so taken into account multiplied by the fraction

determined under subparagraph (B).

(B) Determination of fraction

For purposes of subparagraph (A), the fraction determined

under this subparagraph is 1 reduced by a fraction -

(i) the numerator of which is that portion of the basis of

the property which is allocable to such financing or

proceeds, and

(ii) the denominator of which is the basis of the property.

(C) Subsidized energy financing

For purposes of subparagraph (A), the term "subsidized energy

financing" means financing provided under a Federal, State, or

local program a principal purpose of which is to provide

subsidized financing for projects designed to conserve or

produce energy.

(5) Certain progress expenditure rules made applicable

Rules similar to the rules of subsections (c)(4) and (d) of

section 46 (as in effect on the day before the date of the

enactment of the Revenue Reconciliation Act of 1990) shall apply

for purposes of this subsection.

(b) Reforestation credit

(1) In general

For purposes of section 46, the reforestation credit for any

taxable year is 10 percent of the portion of the amortizable

basis of any qualified timber property which was acquired during

such taxable year and which is taken into account under section

194 (after the application of section 194(b)(1)).

(2) Definitions

For purposes of this subpart, the terms "amortizable basis" and

"qualified timber property" have the respective meanings given to

such terms by section 194.

-SOURCE-

(Added Pub. L. 87-834, Sec. 2(b), Oct. 16, 1962, 76 Stat. 967;

amended Pub. L. 88-272, title II, Sec. 203(a)(1), (3)(A), (b), (c),

Feb. 26, 1964, 78 Stat. 33, 34; Pub. L. 89-800, Sec. 1 Nov. 8,

1966, 80 Stat. 1508; Pub. L. 89-809, title II, Sec. 201(a), Nov.

13, 1966, 80 Stat. 1575; Pub. L. 90-26, Secs. 1, 2(a), 3, June 13,

1967, 81 Stat. 57, 58; Pub. L. 91-172, title I, Sec. 121(d)(2)(A),

title IV, Sec. 401(e)(2)-(4), Dec. 30, 1969, 83 Stat. 547, 603;

Pub. L. 92-178, title I, Secs. 102(a)(2), 103, 104(a)(1),

(b)-(f)(1), (g), 108(b), (c), Dec. 10, 1971, 85 Stat. 499-502, 507;

Pub. L. 94-12, title III, Secs. 301(c)(1), 302(c)(3), title VI,

Sec. 604(a), Mar. 29, 1975, 89 Stat. 38, 44, 65; Pub. L. 94-455,

title VIII, Secs. 802(b)(6), 804(a), title X, Sec. 1051(h)(1),

title XIX, Secs. 1901(a)(5), (b)(11)(A), 1906(b)(13)(A), title XXI,

Sec. 2112(a)(1), Oct. 4, 1976, 90 Stat. 1583, 1591, 1647, 1764,

1795, 1834, 1905; Pub. L. 95-473, Sec. 2(a)(2)(A), Oct. 17, 1978,

92 Stat. 1464; Pub. L. 95-600, title I, Sec. 141(b), title III,

Secs. 312(c)(1)-(3), 314(a), (b), 315(a)-(c), title VII, Sec.

703(a)(3), (4), Nov. 6, 1978, 92 Stat. 2791, 2826-2829, 2939; Pub.

L. 95-618, title III, Sec. 301(b), (d)(1), (2), Nov. 9, 1978, 92

Stat. 3195, 3199, 3200; Pub. L. 96-222, title I, Secs.

101(a)(7)(G), (H), (L)(i)(I)-(IV), (ii)(III)-(VI), (iii)(II),

(III), (v)(II)-(V), (M)(ii), (iii), 103(a)(2)(A), (4)(B),

108(c)(6), Apr. 1, 1980, 94 Stat. 198-201, 208, 209, 228; Pub. L.

96-223, title II, Secs. 221(b), 222(a)-(e)(1), (f)-(i), 223(a)(1),

(c)(1), Apr. 2, 1980, 94 Stat. 261-266; Pub. L. 96-451, title III,

Sec. 302(a), Oct. 14, 1980, 94 Stat. 1991; Pub. L. 96-605, title I,

Sec. 109(a), title II, Sec. 223(a), Dec. 28, 1980, 94 Stat. 3525,

3528; Pub. L. 97-34, title II, Secs. 211(a)(2), (c), (e)(3), (4),

(h), 212(a)(3), (b), (c), (d)(2)(A), 213(a), 214(a), (b), title

III, Sec. 332(b), Aug. 13, 1981, 95 Stat. 227-229, 235, 236, 239,

240, 296; Pub. L. 97-248, title II, Secs. 205(a)(1), (4), (5)(A),

209(c), Sept. 3, 1982, 96 Stat. 427, 429, 447; Pub. L. 97-354,

Secs. 3(d), 5(a)(7), (8), Oct. 19, 1982, 96 Stat. 1689, 1692; Pub.

L. 97-362, title I, Sec. 104(a), Oct. 25, 1982, 96 Stat. 1729; Pub.

L. 97-424, title V, Sec. 546(a), Jan. 6, 1983, 96 Stat. 2198; Pub.

L. 97-448, title I, Sec. 102(e)(2)(A), (f)(2), (3), (6), title II,

Sec. 202(c), title III, Sec. 306(a)(3), Jan. 12, 1983, 96 Stat.

2371, 2372, 2396, 2400; Pub. L. 98-369, div. A, title I, Secs. 11,

31(b), (c), 111(e)(8), 113(a)(1), (b)(3), (4), 114(a), title IV,

Secs. 431(c), 474(o)(10)-(18), title VII, Secs. 712(b), 721(x)(1),

735(c)(1), title X, Sec. 1043(a), July 18, 1984, 98 Stat. 503, 517,

518, 633, 635, 637, 638, 808, 836, 837, 946, 971, 981, 1044; Pub.

L. 99-121, title I, Sec. 103(b)(5), Oct. 11, 1985, 99 Stat. 510;

Pub. L. 99-514, title II, Sec. 251(b), (c), title VII, Sec.

701(e)(4)(C), title VIII, Sec. 803(b)(2)(B), title XII, Secs.

1272(d)(5), 1275(c)(5), title XV, Sec. 1511(c)(3), title XVIII,

Secs. 1802(a)(4)(C), (5)(B), (9)(A), (B), 1809(d)(2), (e),

1847(b)(6), 1879(j)(1), Oct. 22, 1986, 100 Stat. 2184, 2186, 2343,

2355, 2594, 2599, 2745, 2788, 2789, 2821, 2856, 2908; Pub. L.

100-647, title I, Secs. 1002(a)(14), (16)(A), (20), (29), (30),

1013(a)(41), Nov. 10, 1988, 102 Stat. 3355-3357, 3544; Pub. L.

101-508, title XI, Secs. 11801(c)(6)(A), 11813(a), Nov. 5, 1990,

104 Stat. 1388-523, 1388-541; Pub. L. 102-227, title I, Sec. 106,

Dec. 11, 1991, 105 Stat. 1687; Pub. L. 102-486, title XIX, Sec.

1916(a), Oct. 24, 1992, 106 Stat. 3024.)

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of the Revenue Reconciliation Act of

1990, referred to in subsec. (a)(3), (5), is the date of enactment

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

-MISC1-

AMENDMENTS

1992 - Subsec. (a)(2). Pub. L. 102-486 substituted "The" for

"Except as provided in subparagraph (B), the" in subpar. (A),

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

which read as follows: "(B) Termination. - Effective with respect

to periods after June 30, 1992, the energy percentage is zero. For

purposes of the preceding sentence, rules similar to the rules of

section 48(m) (as in effect on the day before the date of the

enactment of the Revenue Reconciliation Act of 1990) shall apply."

1991 - Subsec. (a)(2)(B). Pub. L. 102-227 substituted "June 30,

1992" for "December 31, 1991".

1990 - Pub. L. 101-508, Sec. 11813(a), amended section generally,

substituting section catchline for one which read: "Definitions;

special rules" and in text substituting present provisions for

provisions defining section 38 property, new section 38 property,

used section 38 property, provisions relating to certain leased

property, estates and trusts, special rules for qualified

rehabilitated buildings, credit for movie and television films,

treatment of energy property, application of certain transitional

rules, definitions of certain credits, definition of single purpose

agricultural or horticultural structure, basis adjustment to

section 38 property, certain section 501(d) organizations, special

rules relating to sound recordings, and a cross reference to

section 381 of this title.

Subsec. (a)(8). Pub. L. 101-508, Sec. 11801(c)(6)(A), struck out

par. (8) "Amortized property" which read as follows: "Any property

with respect to which an election under section 167(k), 184, or 188

applies shall not be treated as section 38 property."

1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1002(a)(29), which

directed amendment of par. (1) by substituting "property to which

section 168 applies" for "recovery property (within the meaning of

section 168)" in penultimate sentence, was executed by making the

substitution for "recovery property (within the meaning of section

168", which results in retaining remaining parenthetical material

and closing parenthesis.

Subsec. (a)(5)(A)(ii). Pub. L. 100-647, Sec. 1002(a)(14)(A)-(C),

substituted "168(h)(2)(C)" for "168(j)(4)(C)", "168(h)(2)(A)(iii)"

for "168(j)(4)(A)(iii)", and "168(h)(2)(B)" for "168(j)(4)(B)".

Subsec. (a)(5)(B)(i). Pub. L. 100-647, Sec. 1002(a)(14)(D),

substituted "168(i)(3)" for "168(j)(6)".

Subsec. (a)(5)(B)(ii). Pub. L. 100-647, Sec. 1002(a)(14)(E),

substituted "168(h)(1)(C)(ii)" for "168(j)(3)(C)(ii)".

Subsec. (a)(5)(D). Pub. L. 100-647, Sec. 1002(a)(14)(F),

substituted "paragraphs (5) and (6) of section 168(h)" for

"paragraphs (8) and (9) of section 168(j)".

Subsec. (a)(5)(E). Pub. L. 100-647, Sec. 1002(a)(14)(G), amended

subpar. (E) generally, substituting "provision" for "provisions"

and "168(h)" for "168(j)".

Subsec. (l)(2)(C). Pub. L. 100-647, Sec. 1002(a)(30), substituted

"to which section 168 applies" for "which is recovery property

(within the meaning of section 168)".

Subsec. (l)(11)(A)(ii). Pub. L. 100-647, Sec. 1013(a)(41),

substituted "a private activity bond (within the meaning of section

141)" for "an industrial development bond (within the meaning of

section 103(b)(2))".

Subsec. (s). Pub. L. 100-647, Sec. 1002(a)(20), redesignated

subsec. (s), relating to cross reference, as (t).

Subsec. (s)(9). Pub. L. 100-647, Sec. 1002(a)(16)(A), added par.

(9).

Subsec. (t). Pub. L. 100-647, Sec. 1002(a)(20), redesignated

subsec. (s), relating to cross reference, as (t).

1986 - Subsec. (a)(2)(B)(vii). Pub. L. 99-514, Secs. 1272(d)(5),

1275(c)(5), struck out "932," after "931," and "or which is

entitled to the benefits of section 934(b)" after "in effect under

section 936", and substituted "or 933" for ", 933, or 934(c)".

Subsec. (a)(4). Pub. L. 99-514, Sec. 1802(a)(9)(A), substituted

"514(b)" for "514(c)" and "514(a)" for "514(b)".

Subsec. (a)(5)(B)(iii). Pub. L. 99-514, Sec. 1802(a)(5)(B),

struck out cl. (iii) which provided that (I) in the case of any

aircraft used under a qualifying lease (as defined in section

47(a)(7)(C)) and which is leased to a foreign person or entity

before January 1, 1990, clause (i) shall be applied by substituting

"3 years" for "6 months" and that (II) for purposes of applying

section 47(a)(1) and (5)(B) there shall not be taken into account

any period of a lease to which subclause (I) applies.

Subsec. (a)(5)(D), (E). Pub. L. 99-514, Sec. 1802(a)(4)(C), added

subpar. (D) and redesignated former subpar. (D) as (E).

Subsec. (b)(1). Pub. L. 99-514, Sec. 1809(e)(1), inserted "Such

term includes any section 38 property the reconstruction of which

is completed by the taxpayer, but only with respect to that portion

of the basis which is properly attributable to such

reconstruction."

Subsec. (b)(2). Pub. L. 99-514, Sec. 1809(e)(2), in introductory

provisions substituted "the first sentence of paragraph (1)" for

"paragraph (1)", in subpar. (B) substituted "3 months after" for "3

months of", in closing provisions substituted "used under the

leaseback (or lease) referred to in subparagraph (B)" for "used

under the lease" and inserted "The preceding sentence shall not

apply to any property if the lessee and lessor of such property

make an election under this sentence. Such an election, once made,

may be revoked only with the consent of the Secretary."

Subsec. (d)(4)(D). Pub. L. 99-514, Sec. 701(e)(4)(C), inserted

"(as in effect on the day before the date of the enactment of the

Tax Reform Act of 1986)".

Subsec. (d)(6)(C)(ii). Pub. L. 99-514, Sec. 1511(c)(3),

substituted "the underpayment rate" for "the rate" in closing

provisions.

Subsec. (g)(1). Pub. L. 99-514, Sec. 251(b), amended par. (1)

generally, restating in subpars. (A) to (D) provisions relating to

qualified rehabilitated buildings which had in subpar. (A) provided

general definition of qualified rehabilitated building, in subpar.

(B) directed that 30 years must have elapsed since construction, in

subpar. (C) provided general definition of substantially

rehabilitated with special rule for phased rehabilitation and

application of provision to lessees, and in subpar. (D) provided

that rehabilitation included reconstruction, and striking out

former subpar. (E) which had provided an alternative test for

definition of qualified rehabilitated building.

Subsec. (g)(2). Pub. L. 99-514, Sec. 251(b), amended par. (2)

generally, in subpar. (A) striking out reference to amounts

"incurred after December 31, 1981" in introductory provision, and

in cl. (i) substituting subcls. (I) to (IV) for "for real property

(or additions or improvements to real property) which have a

recovery period (within the meaning of section 168) of 19 (15 years

in the case of low-income housing) years,", in subpar. (B), in cl.

(i), substituting provision relating to use of straight line

depreciation for provision relating to use of accelerated methods

of depreciation, redesignating former cl. (vi) as (v) and

substituting "section 168(h)" for "section 168(j)", redesignating

former cl. (v) as (vi) and substituting "less than the recovery

period determined under section 168(c)" for "less than 19 years (15

years in the case of low-income housing", restating subpar. (C)

without change, and in subpar. (D) substituting provisions defining

nonresidential real property, residential rental property and class

life for provisions defining low-income housing.

Subsec. (g)(2)(B)(vi)(I). Pub. L. 99-514, Sec. 1802(a)(9)(B),

substituted "section 168(j)" for "section 168(j)(3)".

Subsec. (g)(3). Pub. L. 99-514, Sec. 251(b), in amending par. (3)

generally, inserted introductory phrase "For purposes of this

subsection - ".

Subsec. (g)(4). Pub. L. 99-514, Sec. 251(b), in amending subsec.

(g) generally, reenacted par. (4) without change.

Subsec. (l)(5). Pub. L. 99-514, Sec. 1847(b)(6), substituted

"section 23(c)" for "section 44C(c)" and "section

23(c)(4)(A)(viii)" for "section 44C(c)(4)(A)(viii)".

Subsec. (q)(3). Pub. L. 99-514, Sec. 251(c), struck out "other

than a certified historic structure" after "qualified rehabilitated

building".

Subsec. (q)(7). Pub. L. 99-514, Sec. 1809(d)(2), renumbered par.

(6), relating to special rule for qualified films, as (7).

Subsec. (r). Pub. L. 99-514, Sec. 1879(j)(1), added subsec. (r).

Former subsec. (r) redesignated (s).

Subsec. (s). Pub. L. 99-514, Sec. 1879(j)(1), redesignated former

subsec. (r) as (s).

Subsec. (s)(5). Pub. L. 99-514, Sec. 803(b)(2)(B), which directed

the general amendment of par. (5) of subsec. (r), was executed by

amending par. (5) of subsec. (s) to reflect the probable intent of

Congress and the intervening redesignation of subsec. (r) as (s) by

Pub. L. 99-514, Sec. 1879(j)(1), see note above. Prior to

amendment, par. (5) read as follows: "For purposes of this

subsection, the term "sound recording" means any sound recording

described in section 280(c)(2)."

1985 - Subsec. (g)(2)(A)(i), (B)(v). Pub. L. 99-121 substituted

"19" for "18".

1984 - Subsec. (a)(5). Pub. L. 98-369, Sec. 31(b), amended par.

(5) generally, to extend its scope to encompass property used by

foreign persons or entities and to create an exception for

short-term leases by substituting provisions covered by subpars.

(A) to (D) for former provisions which had directed that property

used by the United States, any State or political subdivision

thereof, any international organization, or any agency or

instrumentality of any of the foregoing not be treated as section

38 property, that for purposes of that prohibition the

International Telecommunications Satellite Consortium, the

International Maritime Satellite Organization, and any successor

organization of such Consortium or Organization not be treated as

an international organization, and that if any qualified

rehabilitated building were used by the governmental unit pursuant

to a lease, this paragraph would not apply to that portion of the

basis of such building attributable to qualified rehabilitation

expenditures.

Subsec. (b). Pub. L. 98-369, Sec. 114(a), amended subsec. (b)

generally, substituting a general definition of "new section 38

property" for definitions which made reference to property

constructed, reconstructed or erected after December 31, 1961, and

adding pars. (2) and (3).

Subsec. (c)(2)(A). Pub. L. 98-369, Sec. 11(a), substituted

"$125,000 ($150,000 for taxable years beginning after 1987)" for

"$150,000 ($125,000 for taxable years beginning in 1981, 1982,

1983, or 1984)" in first sentence, and "$125,000 (or $150,000" for

"$150,000 (or $125,000" in two places in second sentence.

Subsec. (c)(2)(B). Pub. L. 98-369, Sec. 11(b), substituted

"$62,500 ($75,000 for taxable years beginning after 1987)" for

"$75,000 ($62,500 for taxable years beginning in 1981, 1982, 1983,

or 1984)".

Subsec. (c)(3)(B). Pub. L. 98-369, Sec. 474(o)(10), substituted

"section 39" for "section 46(b)".

Subsec. (d)(1)(B). Pub. L. 98-369, Sec. 474(o)(11), substituted

"section 38(c)(3)(B)" for "section 46(a)(6)".

Subsec. (d)(6). Pub. L. 98-369, Sec. 431(c), added par. (6).

Subsec. (f)(3). Pub. L. 98-369, Sec. 474(o)(12), struck out par.

(3) which provided that the $25,000 amount specified under

subparagraphs (A) and (B) of section 46(a)(3) applicable to an

estate or trust be reduced to an amount which bore the same ratio

to $25,000 as the amount of the qualified investment allocated to

the estate or trust under paragraph (1) to the entire amount of the

qualified investment.

Subsec. (g)(1)(E). Pub. L. 98-369, Sec. 1043(a), added subpar.

(E).

Subsec. (g)(2)(A)(i). Pub. L. 98-369, Sec. 111(e)(8)(A), (B),

substituted "real property" for "property" in two places, and "18

(15 years in the case of low-income housing)" for "15".

Subsec. (g)(2)(B)(i). Pub. L. 98-369, Sec. 31(c)(2), inserted

"The preceding sentence shall not apply to any expenditure to the

extent subsection (f)(12) or (j) of section 168 applies to such

expenditure."

Subsec. (g)(2)(B)(v). Pub. L. 98-369, Sec. 111(e)(8)(C),

substituted "18 years (15 years in the case of low-income housing)"

for "15 years".

Subsec. (g)(2)(B)(vi). Pub. L. 98-369, Sec. 31(c)(1), added cl.

(vi).

Subsec. (g)(2)(D). Pub. L. 98-369, Sec. 111(e)(8)(D), added

subpar. (D).

Subsec. (k)(4). Pub. L. 98-369, Sec. 113(b)(3)(B), inserted "or

at-risk rules" after "test" in heading.

Subsec. (k)(4)(A). Pub. L. 98-369, Sec. 113(b)(3)(A), inserted ",

section 46(c)(8), or section 46(c)(9)".

Subsec. (k)(4)(B). Pub. L. 98-369, Sec. 113(b)(3)(C), substituted

"used" for "issued".

Subsec. (k)(5)(D)(i). Pub. L. 98-369, Sec. 721(x)(1), substituted

"S corporation" for "electing small business corporation".

Subsec. (l)(1). Pub. L. 98-369, Sec. 474(o)(13), substituted

"section 46(b)(2)" for "section 46(a)(2)(C)".

Subsec. (l)(16)(B)(i). Pub. L. 98-369, Sec. 735(c)(1),

substituted "the chassis of which is an automobile bus chassis and

the body of which is an automobile bus body" for "the chassis and

body of which is exempt under section 4063(a)(6) from the tax

imposed by section 4061(a)".

Subsec. (m). Pub. L. 98-369, Sec. 474(o)(14), substituted

"subsection (b)" for "subsection (a)(2)".

Subsec. (n). Pub. L. 98-369, Sec. 474(o)(15), repealed subsec.

(n). For continuing applicability of par. (4) of subsec. (n), see

section 474(o)(15) of Pub. L. 98-369, set out in Effective Date of

1984 Amendment note below.

Subsec. (o)(3) to (8). Pub. L. 98-369, Sec. 474(o)(16),

redesignated par. (8) as (3) and struck out former pars. (3) to (7)

which defined "employee plan credit", "basic employee plan credit",

"matching employee plan credit", "basic employee plan percentage",

and "matching employee plan percentage", respectively.

Subsec. (q)(1), (3). Pub. L. 98-369, Sec. 474(o)(17)(A),

substituted "section 46(a)" for "section 46(a)(2)".

Subsec. (q)(4)(A)(i). Pub. L. 98-369, Sec. 474(o)(17),

substituted "section 46(a)" for "section 46(a)(2)" and "section

46(b)(1)" for "section 46(a)(2)(B)".

Subsec. (q)(4)(B)(ii). Pub. L. 98-369, Sec. 474(o)(17)(B),

substituted "section 46(b)(1)" for "section 46(a)(2)(B)".

Subsec. (q)(6). Pub. L. 98-369, Sec. 712(b), added par. (6)

relating to adjustment in basis of interest in partnership or S

corporation.

Pub. L. 98-369, Sec. 113(b)(4), added par. (6) relating to

special rule for qualified films.

Subsec. (r). Pub. L. 98-369, Sec. 113(a)(1), added subsec. (r).

Former subsec. (r) redesignated (s).

Pub. L. 98-369, Sec. 474(o)(18), substituted "section 381(c)(26)"

for "section 381(c)(23)".

Subsec. (s). Pub. L. 98-369, Sec. 113(a)(1), redesignated former

subsec. (r) as (s).

1983 - Subsec. (a)(1)(G). Pub. L. 97-448, Sec. 102(e)(2)(A),

inserted "(not including a building and its structural components)

used in connection" after "storage facility".

Subsec. (a)(10). Pub. L. 97-448, Sec. 202(c), amended directory

language of Pub. L. 96-223, Sec. 223(a)(1), to correct an error,

and did not involve any change in text. See 1980 Amendment note

below.

Subsec. (g)(1)(C)(i). Pub. L. 97-448, Sec. 102(f)(2), (6),

substituted "the 24-month period selected by the taxpayer (at the

time and in the manner prescribed by regulation) and ending with or

within the taxable year" for "the 24-month period ending on the

last day of the taxable year" in provisions preceding subcl. (I),

substituted "adjusted basis of such building (and its structural

components)" for "adjusted basis of such property" both in subcl.

(I) and in provision following subcl. (II), and, in provisions

following subcl. (II), substituted "holding period of the building"

for "holding period of the property" and inserted provision that,

for purposes of the preceding sentence, the determination of the

beginning of the holding period shall be made without regard to any

reconstruction by the taxpayer in connection with the

rehabilitation.

Subsec. (g)(5)(A). Pub. L. 97-448, Sec. 102(f)(3), substituted "a

credit is determined under section 46(a)(2)" for "a credit is

allowed under this section" and "the credit so determined" for "the

credit so allowed". See 1982 Amendment note for subsec. (g)(5)

below and see Effective Date of 1982 and 1983 Amendment notes set

out under sections 1 and 196 of this title.

Subsec. (l)(5). Pub. L. 97-424, Sec. 546(a)(3), substituted

reference to subpar. (N) for reference to subpar. (M) in provision

following subparagraphs.

Subsec. (l)(5)(M), (N). Pub. L. 97-424, Sec. 546(a)(1), (2),

added subpar. (M) and redesignated former subpar. (M) as (N).

Subsec. (q)(3). Pub. L. 97-448, Sec. 306(a)(3), substituted

"paragraphs (1) and (2) of this subsection and paragraph (5) of

subsection (d)" for "paragraphs (1) and (2)".

1982 - Subsec. (b). Pub. L. 97-248, Sec. 209(c), inserted

provision that for purposes of determining whether section 38

property subject to a lease is new section 38 property, such

property shall be treated as originally placed in service not

earlier than the date such property is used under the lease, but

only if such property is leased within 3 months after such property

is placed in service.

Subsec. (c)(2)(D). Pub. L. 97-354 substituted "Partnerships and S

corporations" for "Partnerships" in subpar. heading, and inserted

"A similar rule shall apply in the case of an S corporation and its

shareholders".

Subsec. (d)(5). Pub. L. 97-248, Sec. 205(a)(4), added par. (5).

Subsec. (e). Pub. L. 97-354, Sec. 5(a)(7), struck out subsec. (e)

relating to apportionment among shareholders of qualified

investments by an electing small business corporation.

Subsec. (g)(5). Pub. L. 97-248, Sec. 205(a)(5)(A), struck out

par. (5) which, as amended by Sec. 102(f)(3) of Pub. L. 97-448, had

provided that for purposes of this subtitle, if a credit were

determined under section 46(a)(2) for any qualified rehabilitation

expenditure in connection with a qualified rehabilitated building

other than a certified historic structure, the increase in basis of

such property which would (but for this paragraph) have resulted

from such expenditure had to be reduced by the amount of the credit

so determined, that if during any taxable year there was a

recapture amount determined with respect to any qualified

rehabilitated building the basis of which was reduced under subpar.

(A), the basis of such building (immediately before the event

resulting in such recapture), had to be increased by an amount

equal to such recapture amount, and that for purposes of this

paragraph "recapture amount" was defined as any increase in tax (or

adjustment in carrybacks or carryovers) determined under section

47(a)(5). See 1983 Amendment note for subsec. (g)(5) above and see

Effective Date of 1982 and 1983 Amendment notes set out under

sections 1 and 196 of this title.

Subsec. (k)(5)(D)(i). Pub. L. 97-354, Sec. 5(a)(8), substituted

"an S corporation" for "an electing small business corporation

(within the meaning of section 1371)".

Subsec. (l)(7). Pub. L. 97-362, Sec. 104(a), temporarily

substituted the qualification that such term does not include

equipment for hydrogenation, refining, or other process subsequent

to retorting other than hydrogenation or other process which is

applied in the vicinity of the property from which the shale was

extracted and which is applied to bring the shale oil to a grade

and quality suitable for transportation to and processing in a

refinery, for the qualification that such equipment did not include

equipment for hydrogenation, refining, or other processes

subsequent to retorting. See Effective and Termination Dates of

1982 Amendment note below.

Subsecs. (q), (r). Pub. L. 97-248, Sec. 205(a)(1), added subsec.

(q) and redesignated former subsec. (q) as (r).

1981 - Subsec. (a)(1). Pub. L. 97-34, Sec. 211(e)(4), in

provisions following subpar. (G), substituted "Such term includes

only recovery property (within the meaning of section 168 without

regard to any useful life) and any other property" for "Such term

includes only property".

Subsec. (a)(1)(G). Pub. L. 97-34, Sec. 211(c), added subpar. (G).

Subsec. (a)(2)(B)(ii). Pub. L. 97-34, Sec. 211(h), designated

existing provisions as subcl. (I) and added subcl. (II).

Subsec. (a)(3)(D). Pub. L. 97-34, Sec. 212(c), added subpar. (D).

Subsec. (a)(4). Pub. L. 97-34, Sec. 214(a), inserted provision

that, if any qualified rehabilitated building is used by the

tax-exempt organization pursuant to a lease, this paragraph shall

not apply to that portion of the basis of such building which is

attributable to qualified rehabilitation expenditures.

Subsec. (a)(5). Pub. L. 97-34, Sec. 214(b), inserted provision

that, if any qualified rehabilitated building is used by the

governmental unit pursuant to a lease, this paragraph shall not

apply to that portion of the basis of such building which is

attributable to qualified rehabilitation expenditures.

Subsec. (a)(8). Pub. L. 97-34, Sec. 212(d)(2)(A), substituted "or

188" for "188, or 191".

Subsec. (a)(9). Pub. L. 97-34, Sec. 211(a)(2), struck out par.

(9) which set out a special rule for the depreciation of railroad

track.

Subsec. (c)(2)(A) to (C). Pub. L. 97-34, Sec. 213(a), amended

subpars. (A) to (C) generally raising in subpar. (A) the existing

$100,000 dollar limitation to $125,000 in 1981 and to $150,000 in

1985 and in subpar. (B) the existing $50,000 dollar limitation to

$62,500 in 1981 and to $75,000 in 1985.

Subsec. (g). Pub. L. 97-34, Sec. 212(b), in amending subsec. (c)

generally incorporated the concept of "substantial rehabilitation"

into par. (1)(A), substituted "30 years" for "20 years" as the

requisite period in par. (1)(B), substituted a definition of

"substantially rehabilitated" for former provisions that a major

portion could be treated as a separate building in certain cases in

par. (1)(C), reenacted par. (1)(D) without change, substituted

"December 31, 1981" for "October 31, 1978" in provisions of par.

(2)(A) preceding cl. (i), substituted provisions for a recovery

period of 15 years for provisions that had provided for a useful

life of 5 years or more in cl. (i) of par. (2)(A), reenacted cl.

(ii) without change, substituted provisions that accelerated

methods of depreciation may not be used for provisions relating to

property otherwise section 38 property in cl. (i) of par. (2)(B),

reenacted cls. (ii) and (iii) without change, revised the

provisions of cl. (iv) relating to certified historic structures,

and added cl. (v) relating to expenditures of lessees, added par.

(3), redesignated former par. (3) as (4), and added par. (5).

Subsec. (l)(2)(C). Pub. L. 97-34, Sec. 211(e)(3), inserted "or

which is recovery property (within the meaning of section 168)"

after "3 years or more".

Subsec. (n)(1)(A)(i). Pub. L. 97-34, Sec. 332(b), substituted

"which does not exceed" for "equal to".

Subsec. (o)(8). Pub. L. 97-34, Sec. 212(a)(3), added par. (8).

1980 - Subsec. (a)(1). Pub. L. 96-451 added subpar. (F) and

provision for treatment of the useful life of subpar. (F) property

as its normal growing period.

Subsec. (a)(2)(B)(xi). Pub. L. 96-223, Sec. 222(i)(2), added cl.

(xi).

Subsec. (a)(5). Pub. L. 96-605, Sec. 109(a), included the

International Maritime Satellite Organization or any successor

organization within organizations not to be treated as

international organizations.

Subsec. (a)(7)(B). Pub. L. 95-600, Sec. 312(c)(2), as amended by

Pub. L. 96-222, Sec. 103(a)(2)(A), substituted " 'described in

section 50 (as in effect before its repeal by the Revenue Act of

1978' " for " 'described in section 50' ".

Subsec. (a)(10)(A). Pub. L. 96-223, Sec. 223(a)(1), as amended by

Pub. L. 97-448, Sec. 202(c), provided that "petroleum or petroleum

products" does not include petroleum coke or petroleum pitch.

Subsec. (a)(10)(B). Pub. L. 96-222, Sec. 108(c)(6), substituted

"5" for "51".

Subsec. (g)(2)(B)(i). Pub. L. 96-222, Sec. 103(a)(4)(B),

substituted "subsections (a)(1)(E) and (l)" for "subsection

(a)(1)(E)".

Subsec. (l)(1). Pub. L. 96-223, Sec. 221(b)(1), substituted "For

any period for which the energy percentage determined under section

46(a)(2)(C) for any energy property is greater than zero" for "For

the period beginning on October 1, 1978, and ending on December 31,

1982" in provisions preceding subpar. (A) and, in subpars. (A) and

(B), substituted "such energy property" and "such property" for

"any energy property".

Subsec. (l)(2)(A). Pub. L. 96-223, Sec. 222(a), added cls. (vii),

(viii), and (ix).

Subsec. (l)(3)(A). Pub. L. 96-223, Sec. 222(b), (g)(2), struck

out "(other than coke or coke gas)" after "solid fuel" in cl. (iii)

and, in cl. (v), substituted provisions relating to equipment which

converts coal into a substitute for a petroleum or natural gas

derived feedstock for the manufacture of chemicals or other

products and equipment which converts coal into methanol, ammonia,

or hydroprocessed coal liquid or solid for provisions which had

related simply to equipment which used coal as feedstock for the

manufacture of chemicals or other products other than coke or coke

gas, added cl. (ix), and, following cl. (ix), inserted provision

that the equipment described in cl. (vii) includes equipment used

for the storage of fuel derived from garbage at the site at which

such fuel was produced from garbage.

Subsec. (l)(3)(B). Pub. L. 96-223, Sec. 222(i)(1)(A),

redesignated subpar. (C) as (B). Former subpar. (B), which excluded

public utility property from the terms "alternative energy

property", "solar or wind energy property", or "recycling

equipment", was struck out.

Subsec. (l)(3)(C), (D). Pub. L. 96-223, Sec. 222(i)(1)(A), (3),

redesignated subpar. (D) as (C) and inserted following cl. (ii)

provision that, for the purposes of the preceding sentence, in the

case of property which is alternative energy property solely by

reason of the amendments made by section 222(b) of the Crude Oil

Windfall Profit Tax Act of 1980, "January 1, 1980" was to be

substituted for "October 1, 1978". Former subpar. (C) redesignated

(B).

Subsec. (l)(4)(C). Pub. L. 96-223, Sec. 222(c), added subpar.

(C).

Subsec. (l)(5). Pub. L. 96-223, Sec. 222(d), added subpar. (L),

redesignated former subpar. (L) as (M), and inserted provision that

the Secretary shall not specify any property under subpar. (M)

unless he determines that such specification meets the requirements

of par. (9) of section 44C(c) for specification of items under

section 44C(c)(4)(A)(viii).

Subsec. (l)(11). Pub. L. 96-223, Sec. 221(b)(2), substituted

"one-half of the energy percentage determined under section

46(a)(2)(C)" for "5 percent".

Pub. L. 96-223, Sec. 223(c)(1), completely revised par. (11) to

incorporate property financed by subsidized energy financing,

effective with regard to periods after Dec. 31, 1982. Prior to the

revision par. (11) read as follows: "In the case of property which

is financed in whole or in part by the proceeds of an industrial

development bond (within the meaning of section 103(b)(2)) the

interest on which is exempt from tax under section 103, the energy

percentage shall be one-half of the energy percentage determined

under section 46(a)(2)(C)."

Subsec. (l)(13). Pub. L. 96-223, Sec. 222(e)(1), added par. (13).

Subsec. (l)(14). Pub. L. 96-223, Sec. 222(f), added par. (14).

Subsec. (l)(15). Pub. L. 96-223, Sec. 222(g)(1), added par. (15).

Subsec. (l)(16). Pub. L. 96-223, Sec. 222(h), added par. (16).

Subsec. (l)(17). Pub. L. 96-223, Sec. 222(i)(1)(B), added par.

(17).

Subsec. (n). Pub. L. 96-222, Sec. 101(a)(7)(G), (H),

(L)(i)(I)-(IV), (ii)(III)-(VI), (iii)(II), (v)(II)-(IV), (M)(ii),

amended subsec. (n) generally to reflect the renaming of an

investment tax credit ESOP to a tax credit employee stock ownership

plan and a leveraged employee stock ownership plan (commonly

referred to as an ESOP) to an employee stock ownership plan.

Subsec. (n)(6)(B)(i). Pub. L. 96-605, Sec. 223(a), substituted

"the date on which the securities are contributed to the plan" for

"the due date for filing the return for the taxable year

(determined with regard to extensions)".

Subsec. (o). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(III),

(v)(IV), (V), (M)(iii), substituted "employee plan" for "ESOP"

wherever appearing and inserted "percentage" after "attributable to

the matching employee plan" in par. (5).

1978 - Subsec. (a)(1)(A). Pub. L. 95-618, Sec. 301(d)(1),

inserted "(other than an air conditioning or heating unit)" after

"personal property".

Subsec. (a)(1)(D). Pub. L. 95-600, Sec. 314(a), added par. (D).

Subsec. (a)(1)(E). Pub. L. 95-600, Sec. 315(a), added par. (E).

Subsec. (a)(2)(B)(ii). Pub. L. 95-473, Sec. 2(a)(2)(A),

substituted "providing transportation subject to subchapter I of

chapter 105 of title 49" for "subject to part I of the Interstate

Commerce Act".

Subsec. (a)(7)(A). Pub. L. 95-600, Sec. 312(c)(3), struck out

"(other than pretermination property)" after "Property".

Subsec. (a)(7)(B). Pub. L. 95-600, Sec. 312(c)(2), struck out

"described in section 50" after "with respect to property". See

1980 Amendment note above.

Subsec. (a)(8). Pub. L. 95-600, Sec. 315(c), substituted "188, or

191" for "or 188".

Subsec. (a)(10). Pub. L. 95-618, Sec. 301(d)(2), added par. (10).

Subsec. (d)(1)(B). Pub. L. 95-600, Sec. 703(a)(3), substituted

"section 46(a)(6)" for "section 46(a)(5)".

Subsec. (d)(4)(D). Pub. L. 95-600, Sec. 703(a)(4), substituted

"section 57(c)(1)(B)" for "section 57(c)(2)".

Subsec. (g). Pub. L. 95-600, Sec. 315(b), added subsec. (g).

Subsec. (h). Pub. L. 95-600, Sec. 312(c)(1), struck out subsec.

(h) which related to suspension of investment credit.

Subsec. (i). Pub. L. 95-600, Sec. 312(c)(1), struck out subsec.

(i) which related to an exemption from suspension of $20,000 of

investment.

Subsec. (j). Pub. L. 95-600, Sec. 312(c)(1), struck out subsec.

(j) which defined "suspension period".

Subsecs. (l), (m). Pub. L. 95-618, Sec. 301(b), added subsecs.

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

Subsec. (n). Pub. L. 95-618, Sec. 301(b), redesignated former

subsec. (l) as (n).

Pub. L. 95-600, Sec. 141(b), added subsec. (n). Former subsec.

(n) redesignated (p).

Subsec. (o). Pub. L. 95-600, Sec. 141(b), added subsec. (o).

Subsecs. (p), (q). Pub. L. 95-600, Secs. 141(b), 314(b), added

subsec. (p). Former subsec. (n) redesignated (p) and subsequently

as (q).

1976 - Subsec. (a)(2)(B)(vi). Pub. L. 94-455, Sec. 1901(a)(5)(A),

substituted "(43 U.S.C. 1331))" for "; 43 U.S.C., sec. 1331)".

Subsec. (a)(2)(B)(vii). Pub. L. 94-455, Sec. 1051(h)(1),

substituted "(other than a corporation which has an election in

effect under section 936 or which is entitled to the benefits of

section 934(b))" for "(other than a corporation entitled to the

benefits of section 931 or 934(b))".

Subsec. (a)(2)(B)(viii). Pub. L. 94-455, Sec. 1901(a)(5)(B),

substituted "47 U.S.C. 702" for "47 U.S.C., sec. 702".

Subsec. (a)(8). Pub. L. 94-455, Secs. 1901(b)(11)(A), 2112(a)(1),

struck out "169," after "section 167(k),", "187," before "or 188

applies", and provisions relating to the limitation of the

applicability of this paragraph on property to which section 169

applies.

Subsecs. (c)(2)(A), (d)(1), (2)(A). Pub. L. 94-455, Sec.

1906(b)(13)(A), struck out "or his delegate" after "Secretary".

Subsec. (f). Pub. L. 94-455, Sec. 802(b)(6), substituted "section

46(a)(3)" for "section 46(a)(2)".

Subsec. (i)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out

"or his delegate" after "Secretary".

Subsecs. (k), (l). Pub. L. 94-455, Sec. 804(a), added subsec. (k)

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

1975 - Subsec. (a)(2)(B). Pub. L. 94-12, Sec. 604(a), substituted

"territorial waters within the northern portion of the Western

Hemisphere" for "territorial waters" in cl. (x) and inserted

definition of "northern portion of the Western Hemisphere"

following cl. (x).

Subsec. (c)(2)(A). Pub. L. 94-12 Sec. 301(c)(1)(A), substituted

"$100,000" for "$50,000".

Subsec. (c)(2)(B). Pub. L. 94-12, Sec. 301(c)(1)(A), (B),

substituted "$50,000" for "$25,000" and "$100,000" for "$50,000".

Subsec. (c)(2)(C). Pub. L. 94-12, Sec. 301(c)(1)(A), substituted

"$100,000" for "$50,000".

Subsec. (d)(1), (2)(A). Pub. L. 94-12, Sec. 302(c)(3),

substituted "section 46(e)(1)" for "section 46(d)(1)".

1971 - Subsec. (a)(1). Pub. L. 92-178, Sec. 102(a)(2),

substituted "3 years" for "4 years" in second sentence.

Subsec. (a)(1)(B)(ii), (iii). Pub. L. 92-178, Sec. 104(a)(1),

substituted "research facility" for "research or storage facility"

in cl. (ii) and added cl. (iii).

Subsec. (a)(2)(B). Pub. L. 92-178, Sec. 104(c)(2), (3), (d),

added cls. (viii) to (x), respectively.

Subsec. (a)(3)(C). Pub. L. 92-178, Sec. 104(b), added subpar.

(C).

Subsec. (a)(5). Pub. L. 92-178, Sec. 104(c)(1), inserted "(other

than the International Telecommunications Satellite Consortium or

any successor organization)" after "international organization".

Subsec. (a)(6). Pub. L. 92-178, Sec. 104(e), substituted

provisions for treatment of livestock (other than horses) acquired

by the taxpayer as section 38 property, with exception provision

for reduction of acquisition cost by amount equal to amount

realized on sale or other disposition under certain circumstances,

and for nontreatment of horses as section 38 property for former

provision that livestock shall not be treated as section 38

property.

Subsec. (a)(7) to (9). Pub. L. 92-178, Secs. 103, 104(f)(1), (g),

added pars. (7) to (9), respectively.

Subsec. (d). Pub. L. 92-178, Sec. 108(b) and (c), substituted

"section 46(d)(1)" for "section 46(d)"; and designated as par. (1)

the present first sentence, redesignated as subpars. (A) and (B)

provisions formerly designated cls. (1) and (2), again substituted

"section 46(d)(1)" for "section 46(d)" in par. (1) and inserted

"(other than property described in paragraph (4))" in par. (1),

added pars. (2) and (4), incorporated provisions of former second,

third, and fourth sentences in provisions designated as par. (3),

substituted in par. (3) "the lessee shall be treated for all

purposes of this subpart as having acquired a fractional portion of

such property equal to the fraction determined under paragraph

(2)(B) with respect to such property" for "the lessee shall be

treated for all purposes of this subpart as having acquired such

property", and struck out former fifth and sixth sentences

respecting election regarding treatment of leases of suspension

period property and section 38 property. See Effective Date of 1971

Amendment note below.

1969 - Subsec. (a)(4). Pub. L. 91-172, Sec. 121(d)(2)(A),

inserted provision relating to the percentage of the basis or cost

of debt-financed property that may be considered in computing

qualified investment under section 46(c) of this title.

Subsec. (c)(2)(C). Pub. L. 91-172, Sec. 401(e)(2), reenacted

subpar. (C) with minor changes and substituted reference to

controlled group for reference to affiliated group.

Subsec. (c)(3)(C). Pub. L. 91-172, Sec. 401(e)(3), substituted

definition of controlled group for definition of affiliated group.

Subsec. (d)(2). Pub. L. 91-172, Sec. 401(e)(4), substituted

reference to a component member of a controlled group for reference

to a member of an affiliated group.

1967 - Subsec. (a)(2)(B)(i). Pub. L. 90-26, Sec. 3, inserted "or

is operated under contract with the United States" after "the

United States".

Subsec. (h)(2). Pub. L. 90-26, Sec. 2(a), limited definition of

suspension period property to section 38 property where the

physical construction, reconstruction or erection was begun before

May 24, 1967, pursuant to an order placed during the suspension

period, subject to the proviso that in applying the definition to

property the physical construction, reconstruction or erection of

which was begun before May 24, 1967, only that portion of the basis

properly attributable to construction, reconstruction or erection

before May 24, 1967 be taken into account.

Subsec. (j). Pub. L. 90-26, Sec. 1, substituted "March 9, 1967"

for "December 31, 1967".

1966 - Subsec. (a)(2)(B). Pub. L. 89-809 added cl. (vii).

Subsec. (d). Pub. L. 89-800, Sec. 1(b), inserted provisions

covering the treatment of suspension period property, and the

elections to be deemed made in connection therewith.

Subsecs. (h) to (k). Pub. L. 89-800, Sec. 1(a), added subsecs.

(h) to (j) and redesignated former subsec. (h) as (k).

1964 - Subsec. (a)(1)(C). Pub. L. 88-272, Sec. 203(c)(2), added

subpar. (C).

Subsec. (d). Pub. L. 88-272, Sec. 203(a)(3)(A), (b), substituted

"except as provided in paragraph (2)" for "if such property was

constructed by the lessor (or by a corporation which controls or is

controlled by the lessor within the meaning of section 368(c))" in

par. (1), "if such property is leased by a corporation which is a

member of an affiliated group (within the meaning of section

46(a)(5) to another corporation which is a member of the same

affiliated group" for "if paragraph (1) does not apply" in par.

(2), and deleted provisions which stated that if a lessor made an

election under this subsection, subsec. (g) would not apply with

respect to such property, and deductions otherwise allowable under

section 162 to the lessee for amounts paid the lessor would be

adjusted consistent with subsec. (g).

Subsec. (g). Pub. L. 88-272, Sec. 203(a)(1), repealed subsec. (g)

which required that the basis of section 38 property be reduced by

7 percent of the qualified investment.

EFFECTIVE DATE OF 1992 AMENDMENT

Section 1916(b) of Pub. L. 102-486 provided that: "The amendments

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

June 30, 1992."

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by section 11813(a) of Pub. L. 101-508 applicable to

property placed in service after Dec. 31, 1990, but not applicable

to any transition property (as defined in section 49(e) of this

title), any property with respect to which qualified progress

expenditures were previously taken into account under section 46(d)

of this title, and any property described in section 46(b)(2)(C) of

this title, as such sections were in effect on Nov. 4, 1990, see

section 11813(c) of Pub. L. 101-508, set out as a note under

section 29 of this title.

EFFECTIVE DATE OF 1988 AMENDMENT

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

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

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

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

this title.

EFFECTIVE DATE OF 1986 AMENDMENT

If any interest costs incurred after Dec. 31, 1986, are

attributable to costs incurred before Jan. 1, 1987, the amendment

by section 803(b)(2)(B) of Pub. L. 99-514 is applicable to such

interest costs only to the extent such interest costs are

attributable to costs which were required to be capitalized under

section 263 of the Internal Revenue Code of 1954 and which would

have been taken into account in applying section 189 of the

Internal Revenue Code of 1954 (as in effect before its repeal by

section 803 of Pub. L. 99-514) or, if applicable, section 266 of

such Code, see section 7831(d)(2) of Pub. L. 101-239, set out as an

Effective Date note under section 263A of this title.

Amendment by section 251(b), (c) of Pub. L. 99-514 applicable to

property placed in service after Dec. 31, 1986, in taxable years

ending after such date, except as otherwise provided for certain

rehabilitations, see section 251(d) of Pub. L. 99-514, set out as a

note under section 46 of this title.

Amendment by section 701(e)(4)(C) of Pub. L. 99-514 applicable to

taxable years beginning after Dec. 31, 1986, with certain

exceptions and qualifications, see section 701(f) of Pub. L.

99-514, set out as an Effective Date note under section 55 of this

title.

Amendment by section 803(b)(2)(B) of Pub. L. 99-514 applicable to

costs incurred after Dec. 31, 1986, in taxable years ending after

such date, except as otherwise provided, see section 803(d) of Pub.

L. 99-514, set out as an Effective Date note under section 263A of

this title.

Amendment by sections 1272(d)(5) and 1275(c)(5) of Pub. L. 99-514

applicable to taxable years beginning after Dec. 31, 1986, with

certain exceptions and qualifications, see section 1277 of Pub. L.

99-514, set out as a note under section 931 of this title.

Amendment by section 1511(c)(3) of Pub. L. 99-514 applicable for

purposes of determining interest for periods after Dec. 31, 1986,

see section 1511(d) of Pub. L. 99-514, set out as a note under

section 47 of this title.

Section 1879(j)(2) of Pub. L. 99-514 provided that: "The

amendments made by this subsection [amending this section] shall

apply to periods after December 31, 1978 (under rules similar to

the rules of section 48(m) of the Internal Revenue Code of 1954

[now 1986]), in taxable years ending after such date."

Section 1881 of title XVIII of Pub. L. 99-514 provided that:

"Except as otherwise provided in this subtitle, any amendment made

by this subtitle [subtitle A (Secs. 1801-1881) of title XVIII of

Pub. L. 99-514, see Tables for classification] shall take effect as

if included in the provision of the Tax Reform Act of 1984 [Pub. L.

98-369, div. A] to which such amendment relates."

EFFECTIVE DATE OF 1985 AMENDMENT

Amendment by Pub. L. 99-121 applicable with respect to property

placed in service by the taxpayer after May 8, 1985, with specified

exceptions, but amendment of subsec. (g)(2)(B)(v) not applicable to

leases entered into before May 22, 1985, if the lessee signed the

lease before May 17, 1985, see section 105(b)(1), (5) of Pub. L.

99-121, set out as a note under section 168 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Section 18 of Pub. L. 98-369 provided that:

"(a) General Rule. - The amendments made by this part [part I

(Secs. 11-18) of subtitle A of title I of div. A of Pub. L. 98-369,

amending this section and sections 41, 46, 57, 128, 168, 179, 265,

415, 854, 857, and 911 of this title, enacting provisions set out

as a note under section 168 of this title, and amending provisions

set out as notes under sections 128 and 168 of this title] shall

apply to taxable years ending after December 31, 1983.

"(b) Special Rule for Section 14. - The amendment made by section

14 [amending section 41 of this title] shall not apply in the case

of a tax credit employee stock ownership plan if -

"(1) such plan was favorably approved on September 23, 1983, by

employees, and

"(2) not later than January 11, 1984, the employer of such

employees was 100 percent owned by such plan."

Amendment by section 31(b), (c)(1) 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, and

amendment by section 31(c)(2) of Pub. L. 98-369, to the extent it

relates to section 168(f)(12) of this title, effective as if it had

been included in the amendments to section 168 of this title by

section 216(a) of Pub. L. 97-248, see section 31(g)(1), (12) of

Pub. L. 98-369, set out as a note under section 168 of this title.

Amendment by section 111(e)(8) of Pub. L. 98-369 applicable with

respect to property placed in service by the taxpayer after Mar.

15, 1984, subject to certain exceptions, see section 111(g) of Pub.

L. 98-369, set out as a note under section 168 of this title.

Amendment by section 113(b)(3) of Pub. L. 98-369 applicable as if

included in the amendments made by sections 201(a), 211(a)(1), and

211(f)(1) of Pub. L. 97-34, which enacted section 168 and amended

section 46 of this title, see section 113(c)(2)(B) of Pub. L.

98-369, set out as a note under section 168 of this title.

Amendment by section 113(b)(4) of Pub. L. 98-369 applicable as if

included in the amendments made by section 205(a)(1) of Pub. L.

97-248, see section 113(c)(2)(C) of Pub. L. 98-369, set out as a

note under section 168 of this title.

Section 113(c)(1) of Pub. L. 98-369 provided that: "The

amendments made by subsection (a) [amending this section and

section 168 of this title] shall apply to property placed in

service after March 15, 1984, in taxable years ending after such

date."

Section 114(b) of Pub. L. 98-369 provided that: "The amendment

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

property originally placed in service after April 11, 1984

(determined without regard to such amendment)."

Amendment by section 431(c) of Pub. L. 98-369 applicable to

property placed in service after July 18, 1984, in taxable years

ending after such date, but not applicable to property to which

sections 46(c)(8), (9) and 47(d) of this title, as enacted by

section 211(f) of Pub. L. 97-34, do not apply, with the taxpayer

having an option to elect retroactive application of amendment by

Pub. L. 98-369, see section 431(e) of Pub. L. 98-369, set out as a

note under section 46 of this title.

Amendment by section 474(o)(10)-(18) of Pub. L. 98-369 applicable

to taxable years beginning after Dec. 31, 1983, and to carrybacks

from such years, see section 475(a) of Pub. L. 98-369, set out as a

note under section 21 of this title.

Section 474(o)(15) of Pub. L. 98-369, as amended by Pub. L.

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

"Subsection (n) of section 48 (relating to requirements for

allowance of employee plan percentage) is hereby repealed; except

that paragraph (4) of section 48(n) of the Internal Revenue Code of

1986 [formerly I.R.C. 1954] (as in effect before its repeal by this

paragraph) shall continue to apply in the case of any recapture

under section 47(f) of such Code of a credit allowable for a

taxable year beginning before January 1, 1984."

Amendment by section 712(b) of Pub. L. 98-369 effective as if

included in the provision of the Tax Equity and Fiscal

Responsibility Act of 1982, Pub. L. 97-248, to which such amendment

relates, see section 715 of Pub. L. 98-369, set out as a note under

section 31 of this title.

Amendment by section 721(x)(1) of Pub. L. 98-369 effective as if

included in the Subchapter S Revision Act of 1982, Pub. L. 97-354,

see section 721(y)(1) of Pub. L. 98-369, set out as a note under

section 1361 of this title.

Amendment by section 735(c)(1) of Pub. L. 98-369 effective,

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

the Highway Revenue Act of 1982, title V of Pub. L. 97-424, to

which such amendment relates, see section 736 of Pub. L. 98-369,

set out as a note under section 4051 of this title.

Section 1043(b) of Pub. L. 98-369 provided that: "The amendments

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

expenditures incurred after December 31, 1983, in taxable years

ending after such date."

EFFECTIVE DATE OF 1983 AMENDMENT

Amendment by title I of Pub. L. 97-448 effective, except as

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

the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such

amendment relates, see section 109 of Pub. L. 97-448, set out as a

note under section 1 of this title.

Amendment by section 202(c) of Pub. L. 97-448 effective, except

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

of the Crude Oil Windfall Profit Tax Act of 1980, Pub. L. 96-223 to

which such amendment relates, see section 203(a) of Pub. L. 97-448,

set out as a note under section 6652 of this title.

Amendment by section 306(a)(3) of 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 AND TERMINATION DATES OF 1982 AMENDMENTS

Section 104(b) of Pub. L. 97-362, as amended by Pub. L. 99-514,

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

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

to periods beginning after December 31, 1980, and before January 1,

1983, under rules similar to the rules of section 48(m) of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954]."

Amendment by Pub. L. 97-354 applicable to taxable years beginning

after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as

an Effective Date note under section 1361 of this title.

Amendment by section 205(a)(1), (4), (5)(A) of Pub. L. 97-248,

applicable to periods after Dec. 31, 1982, under rules similar to

the rules of subsec. (m) of this section, with certain exceptions

and qualifications, see section 205(c)(1) of Pub. L. 97-248, set

out as an Effective Date note under section 196 of this title.

Amendment by section 209(c) of Pub. L. 97-248 applicable to

property placed in service after Dec. 31, 1983, but not to

qualified leased property described in section 168(f)(8)(D)(v) of

this title which is placed in service before Jan. 1, 1988, or is

placed in service after such date pursuant to a binding contract or

commitment entered into before April 1, 1983, and solely because of

conditions which, as determined by the Secretary of the Treasury or

his delegate, are not within the control of the lessor or lessee,

see sections 208(d)(5) and 209(d)(2) of Pub. L. 97-248, set out as

notes under section 168 of this title.

EFFECTIVE DATE OF 1981 AMENDMENT

Section 213(b) of Pub. L. 97-34, as amended by Pub. L. 97-448,

title I, Sec. 102(g), Jan. 12, 1983, 96 Stat. 2372, provided that:

"The amendment made by this section [amending this section] shall

apply to taxable years beginning after December 31, 1980."

Section 214(c) of Pub. L. 97-34 provided that: "The amendments

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

after July 29, 1980, in taxable years ending after such date."

Section 332(c)(2) of Pub. L. 97-34 provided that: "The amendment

made by subsection (b) [amending this section] shall apply to

qualified investments made after December 31, 1981."

Amendment by section 211(a)(2), (e)(3), (4) of Pub. L. 97-34

applicable to property placed in service after Dec. 31, 1980, see

section 211(i)(1) of Pub. L. 97-34, set out as a note under section

46 of this title.

Amendment by section 211(c) of Pub. L. 97-34 applicable to

periods after Dec. 31, 1980, under rules similar to the rules under

subsec. (m) of this section, see section 211(i)(3) of Pub. L.

97-34, set out as a note under section 46 of this title.

Amendment by section 211(h) of Pub. L. 97-34 applicable to

taxable years beginning after Dec. 31, 1980, see section 211(i)(6)

of Pub. L. 97-34, set out as a note under section 46 of this title.

Amendment by section 212(a)(3), (b), (c), (d)(2)(A) of Pub. L.

97-34 applicable to expenditures incurred after Dec. 31, 1981, in

taxable years ending after such date, see section 212(e) of Pub. L.

97-34, set out as a note under section 46 of this title.

EFFECTIVE DATE OF 1980 AMENDMENTS

Section 109(b) of Pub. L. 96-605 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

taxable years beginning after December 31, 1979."

Section 223(b) of Pub. L. 96-605 provided that: "The amendments

made by subsection (a) [amending this section] shall apply with

respect to taxable years beginning after December 31, 1980."

Section 302(b) of Pub. L. 96-451 provided that: "The amendments

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

respect to additions to capital account made after December 31,

1979."

Section 222(j) of Pub. L. 96-223, as amended by Pub. L. 99-514,

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

"(1) In general. - Except as provided in paragraph (2), the

amendments made by this section [amending this section and section

46 of this title] shall apply to periods after December 31, 1979,

under rules similar to the rules of section 48(m) of the Internal

Revenue Code of 1986 [formerly I.R.C. 1954].

"(2) Alumina electrolytic cells. - The amendments made by

subsection (d)(1) [amending this section] shall apply to periods

after September 30, 1978, under rules similar to the rules of

section 48(m) of such Code."

Section 223(a)(2) of Pub. L. 96-223, as amended by Pub. L.

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

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

to periods after December 31, 1979, under rules similar to the

rules of section 48(m) of the Internal Revenue Code of 1986

[formerly I.R.C. 1954]."

Section 223(c)(2) of Pub. L. 96-223, as amended by Pub. L.

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

"(A) In general. - Except as provided in subparagraph (B), the

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

to periods after December 31, 1982, under rules similar to the

rules of section 48(m) of the Internal Revenue Code of 1986

[formerly I.R.C. 1954]."

"(B) Earlier application for certain property. - In the case of

property which is -

"(i) qualified hydroelectric generating property (described in

section 48(l)(2)(A)(vii) of such Code),

"(ii) cogeneration equipment (described in section

48(l)(2)(A)(viii) of such Code),

"(iii) qualified intercity buses (described in section

48(l)(2)(A)(ix) of such Code),

"(iv) ocean thermal property (described in section

48(l)(3)(A)(ix) of such Code), or

"(v) expanded energy credit property,

the amendment made by paragraph (1) shall apply to periods after

December 31, 1979, under rules similar to the rules of section

48(m) of the Internal Revenue Code of 1986.

"(C) Expanded energy credit property. - For purposes of

subparagraph (B), the term 'expanded energy credit property' means

-

"(i) property to which section 48(l)(3)(A) of such Code applies

because of the amendments made by paragraphs (1) and (2) of

section 222(b) [amending this section],

"(ii) property described in section 48(l)(4)(C) of such Code

(relating to solar process heat),

"(iii) property described in section 48(l)(5)(L) of such Code

(relating to alumina electrolytic cells), and

"(iv) property described in the last sentence of section

48(l)(3)(A) of such Code (relating to storage equipment for

refuse-derived fuel).

"(D) Financing taken into account. - For the purpose of applying

the provisions of section 48(l)(11) of such Code in the case of

property financed in whole or in part by subsidized energy

financing (within the meaning of section 48(l)(11)(C) of such

Code), no financing made before January 1, 1980, shall be taken

into account. The preceding sentence shall not apply to financing

provided from the proceeds of any tax exempt industrial development

bond (within the meaning of section 103(b)(2) of such Code)."

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

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

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

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

section 32 of this title.

Section 108(c)(7) of Pub. L. 96-222 provided that: "Any amendment

made by this subsection [amending sections 4071, 4221, 6416, and

6421 of this title] shall take effect as if included in the

provision of the Energy Tax Act of 1978 [See Short Title of 1978

Amendment note set out under section 1 of this title] to which such

amendment relates; except that the amendment made by paragraph (6)

[amending this section] shall take effect on the first day of the

first calendar month which begins more than 10 days after the date

of the enactment of this Act [Apr. 1, 1980]."

EFFECTIVE DATE OF 1978 AMENDMENTS

Section 301(d)(4) of Pub. L. 95-618 provided that:

"(A) In general. - The amendments made by this subsection

[amending this section and section 167 of this title] shall apply

to property which is placed in service after September 30, 1978.

"(B) Binding contracts. - The amendments made by this subsection

[amending this section and section 167 of this title] shall not

apply to property which is constructed, reconstructed, erected, or

acquired pursuant to a contract which, on October 1, 1978, and at

all times thereafter, was binding on the taxpayer."

Amendment by section 141(b) of Pub. L. 95-600 effective with

respect to qualified investment for taxable years beginning after

Dec. 31, 1978, see section 141(g)(1) of Pub. L. 95-600, set out as

an Effective Date note under section 409 of this title.

Amendment by section 312(c)(1), (2), (3) of Pub. L. 95-600

applicable to taxable years ending after Dec. 31, 1978, see section

312(d) of Pub. L. 95-600, set out as a note under section 46 of

this title.

Section 314(c) of Pub. L. 95-600 provided that: "The amendments

made by subsections (a) and (b) [amending this section] shall apply

to taxable years ending after August 15, 1971."

Section 315(d) of Pub. L. 95-600 provided that: "The amendments

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

years ending after October 31, 1978; except that the amendment made

by subsection (c) shall only apply with respect to property placed

in service after such date."

Amendment by section 703(a)(3), (4) of Pub. L. 95-600 effective

on Oct. 4, 1976, see section 703(r) of Pub. L. 95-600, set out as a

note under section 46 of this title.

EFFECTIVE DATE OF 1976 AMENDMENT

Amendment by section 802(b)(6) of Pub. L. 94-455 applicable to

taxable years beginning after Dec. 31, 1975, see section 802(c) of

Pub. L. 94-455, set out as a note under section 46 of this title.

Section 804(e) of Pub. L. 94-455, as amended by Pub. L. 99-514,

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

"(1) In general. - The amendments made by subsections (a) and

(b) [amending this section and section 47 of this title] shall

apply to taxable years beginning after December 31, 1974.

"(2) Election may also apply to property described in section

50(a). - At the election of the taxpayer, made within 1 year

after the date of the enactment of this Act [Oct. 4, 1976] in

such manner as the Secretary of the Treasury or his delegate may

by regulations prescribe, the amendments made by subsections (a)

and (b) shall also apply to property which is property described

in section 50(a) of the Internal Revenue Code of 1986 [formerly

I.R.C. 1954] and which is placed in service in taxable years

beginning before January 1, 1975."

Amendment by section 1051(h)(1) of Pub. L. 94-455 applicable to

taxable years beginning after Dec. 31, 1975 with certain

exceptions, see section 1051(i) of Pub. L. 94-455, set out as a

note under section 27 of this title.

Amendment by section 1901(a)(5), (b)(11)(A) of Pub. L. 94-455

applicable with respect to taxable years beginning after Dec. 31,

1976, see section 1901(d) of Pub. L. 94-455, set out as a note

under section 2 of this title.

Amendment by section 2112(a) of Pub. L. 94-455 applicable to

property acquired by the taxpayer after Dec. 31, 1976, and

property, the construction, reconstruction, or erection of which

was completed by the taxpayer after Dec. 31, 1976, (but only to the

extent of the basis thereof attributable to construction,

reconstruction, or erection after such date), in taxable years

beginning after such date, see section 2112(d)(1) of Pub. L.

94-455, set out as a note under section 46 of this title.

EFFECTIVE AND TERMINATION DATES OF 1975 AMENDMENT

Section 301(c)(2) of Pub. L. 94-12, as amended by Pub. L. 94-455,

title VIII, Sec. 801, Oct. 4, 1976, 90 Stat. 1580; Pub. L. 95-600,

title III, Sec. 311(b), Nov. 6, 1978, 92 Stat. 2824, provided that:

"The amendments made by paragraph (1) [amending this section] shall

apply only to taxable years beginning after December 31, 1974."

Amendment by section 302(c)(3) of Pub. L. 94-12 applicable to

taxable years ending after Dec. 31, 1974, see section 305(a) of

Pub. L. 94-12, set out as an Effective Date of 1975 Amendment note

under section 46 of this title.

Section 604(b) of Pub. L. 94-12, as amended by Pub. L. 99-514,

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

"(1) In general. - The amendments made by subsection (a)

[amending this section] shall apply to property, the

construction, reconstruction, or erection of which was completed

after March 18, 1975, or the acquisition of which by the taxpayer

occurred after such date.

"(2) Binding contract. - The amendments made by subsection (a)

[amending this section] shall not apply to property constructed,

reconstructed, erected, or acquired pursuant to a contract which

was on April 1, 1974, and at all times thereafter, binding on the

taxpayer.

"(3) Certain lease-back transactions, etc. - Where a person who

is a party to a binding contract described in paragraph (2)

transfers rights in such contract (or in the property to which

such contract relates) to another person but a party to such

contract retains a right to use the property under a lease with

such other person, then to the extent of the transferred rights

such other person shall, for purposes of paragraph (2), succeed

to the position of the transferor with respect to such binding

contract and such property. The preceding sentence shall apply,

in any case in which the lessor does not make an election under

section 48(d) of the Internal Revenue Code of 1986 [formerly

I.R.C. 1954], only if a party to such contract retains a right to

use the property under a long-term lease."

EFFECTIVE DATE OF 1971 AMENDMENT

Section 104(h) of Pub. L. 92-178, as amended by Pub. L. 99-514,

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

amendments made by this section [amending this section and sections

169 and 1245 of this title] (other than by subsections (c)(1),

(c)(2), and (g) [amending this section]) shall apply to property

described in section 50 of the Internal Revenue Code of 1986

[formerly I.R.C. 1954]. The amendments made by subsections (c)(1),

(c)(2), and (g) [amending this section] shall apply to taxable

years ending after December 31, 1961."

Amendment by section 108(b), (c) of Pub. L. 92-178, applicable to

leases entered into after Sept. 22, 1971, and after Nov. 8, 1971,

respectively, see section 108(d) of Pub. L. 92-178, set out as a

note under section 46 of this title.

EFFECTIVE DATE OF 1969 AMENDMENT

Amendment by section 121(d)(2)(A) of Pub. L. 91-172 applicable to

taxable years beginning after Dec. 31, 1969, see section 121(g) of

Pub. L. 91-172, set out as a note under section 511 of this title.

Amendment by section 401(e)(2)-(4) of Pub. L. 91-172 applicable

with respect to taxable years ending on or after Dec. 31, 1970, see

section 401(h)(3) of Pub. L. 91-172, set out as a note under

section 1561 of this title.

EFFECTIVE DATE OF 1967 AMENDMENT

Section 4 of Pub. L. 90-26 provided that: "The amendments made by

the first three sections of this Act [amending this section and

section 167 of this title] shall apply to taxable years ending

after March 9, 1967."

EFFECTIVE DATE OF 1966 AMENDMENTS

Section 201(b) of Pub. L. 89-809, as amended by Pub. L. 99-514,

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

amendments made by subsection (a) [amending this section] shall

apply to taxable years ending after December 31, 1965, but only

with respect to property placed in service after such date. In

applying section 46(b) of the Internal Revenue Code of 1986

[formerly I.R.C. 1954] (relating to carryback and carryover of

unused credits), the amount of any investment credit carryback to

any taxable year ending on or before December 31, 1965, shall be

determined without regard to the amendments made by this section."

Amendment by Pub. L. 89-800 applicable to taxable years ending

after Oct. 9, 1966, see section 4 of Pub. L. 89-800, set out as a

note under section 46 of this title.

EFFECTIVE DATE OF 1964 AMENDMENT

Section 203(a)(4) of Pub. L. 88-272 provided that: "Paragraphs

(1) [amending this section] and (3) [amending this section and

section 1016 of this title and repealing section 181 of this title]

of this subsection shall apply -

"(A) in the case of property placed in service after December

31, 1963, with respect to taxable years ending after such date,

and

"(B) in the case of property placed in service before January

1, 1964, with respect to taxable years beginning after December

31, 1963."

Section 203(f) of Pub. L. 88-272 provided that:

"(1) The amendments made by subsection (b) [amending this

section] shall apply with respect to property possession of which

is transferred to a lessee on or after the date of enactment of

this Act [Feb. 26, 1964].

"(2) The amendments made by subsection (c) [amending this

section] shall apply with respect to taxable years ending after

June 30, 1963.

"(3) The amendments made by subsection (d) [amending section 1245

of this title] shall apply with respect to dispositions after

December 31, 1963, in taxable years ending after such date."

EFFECTIVE DATE

Section applicable with respect to taxable years ending after

Dec. 31, 1961, see section 2(h) of Pub. L. 87-834, set out as a

note under section 46 of this title.

SAVINGS PROVISION

For provisions that nothing in amendment by 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

Functions, powers, and duties of Federal Aviation Agency and of

Administrator and other offices and officers thereof transferred by

Pub. L. 89-670, Oct. 15, 1966, 80 Stat. 931, to Secretary of

Transportation, with functions, powers, and duties of Secretary of

Transportation pertaining to aviation safety to be exercised by

Federal Aviation Administrator in Department of Transportation, see

section 106 of Title 49, Transportation.

-MISC2-

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.

APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION

TO TREATY OBLIGATIONS OF UNITED STATES

For applicability of amendment by section 701(e)(4)(C) of Pub. L.

99-514 notwithstanding any treaty obligation of the United States

in effect on Oct. 22, 1986, with provision that for such purposes

any amendment by title I of Pub. L. 100-647 be treated as if it had

been included in the provision of Pub. L. 99-514 to which such

amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100-647,

set out as a note under section 861 of this title.

SPECIAL RULE

Section 1879(j)(3) of Pub. L. 99-514 provided that: "If refund or

credit of any overpayment of tax resulting from the application of

this subsection [amending this section] is prevented at any time

before the close of the date which is 1 year after the date of the

enactment of this Act [Oct. 22, 1986] by operation of any law or

rule of law (including res judicata), refund or credit of such

overpayment (to the extent attributable to the application of the

amendments made by this subsection [amending this section]) may,

nevertheless, be made or allowed if claim therefor is filed before

the close of such 1-year period."

CLARIFICATION OF EFFECT OF 1984 AMENDMENT ON INVESTMENT TAX CREDIT

For provision that nothing in the amendments made by section

474(o) of Pub. L. 98-369, which amended this section, be construed

as reducing the investment tax credit in taxable years beginning

before Jan. 1, 1984, see section 475(c) of Pub. L. 98-369, set out

as a note under section 46 of this title.

ALTERNATIVE METHODS OF COMPUTING CREDIT FOR PAST PERIODS

Section 804(c) of Pub. L. 94-455, as amended by Pub. L. 99-514,

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

"(1) General rule for determining useful life, predominant

foreign use, etc. - In the case of a qualified film (within the

meaning of section 48(k)(1)(B) of the Internal Revenue Code of

1986 [formerly I.R.C. 1954]) placed in service in a taxable year

beginning before January 1, 1975, with respect to which neither

an election under paragraph (2) of this subsection nor an

election under subsection (e)(2) applies -

"(A) the applicable percentage under section 46(c)(2) of such

Code shall be determined as if the useful life of the film

would have expired at the close of the first taxable year by

the close of which the aggregate amount allowable as a

deduction under section 167 of such Code would equal or exceed

90 percent of the basis of such property (adjusted for any

partial dispositions),

"(B) for purposes of section 46(c)(1) of such Code, the basis

of the property shall be determined by taking into account the

total production costs (within the meaning of section

48(k)(5)(B) of such Code),

"(C) for purposes of section 48(a)(2) of such Code, such film

shall be considered to be used predominantly outside the United

States in the first taxable year for which 50 percent or more

of the gross revenues received or accrued during the taxable

year from showing the film were received or accrued from

showing the film outside the United States, and

"(D) Section 47(a)(7) of such Code shall apply.

"(2) Election of 40-percent method. -

"(A) In general. - A taxpayer may elect to have this

paragraph apply to all qualified films placed in service during

taxable years beginning before January 1, 1975 (other than

films to which an election under subsection (e)(2) of this

section applies).

"(B) Effect of election. - If the taxpayer makes an election

under this paragraph, then section 48(k) of the Internal

Revenue Code of 1986 shall apply to all qualified films

described in subparagraph (A) with the following modifications:

"(i) subparagraph (B) of paragraph (4) shall not apply, but

in determining qualified investment under section 46(c)(1) of

such Code there shall be used (in lieu of the basis of such

property) an amount equal to 40 percent of the aggregate

production costs (within the meaning of paragraph (5)(B) of

such section 48(k)),

"(ii) paragraph (2) shall be applied by substituting '100

percent' for '66 2/3 percent', and

"(iii) paragraph (3) and paragraph (5) (other than

subparagraph (B)) shall not apply.

"(C) Rules relating to elections. - An election under this

paragraph shall be made not later than the day which is 6

months after the date of the enactment of this Act [Oct. 4,

1976] and shall be made in such manner as the Secretary of the

Treasury or his delegate shall by regulations prescribe. Such

an election may be revoked only with the consent of the

Secretary of the Treasury or his delegate.

"(D) The taxpayer must consent to join in certain

proceedings. - No election may be made under this paragraph or

subsection (e)(2) by any taxpayer unless he consents, under

regulations prescribed by the Secretary of the Treasury or his

delegate, to treat the determination of the investment credit

allowable on each film subject to an election as a separate

cause of action, and to join in any judicial proceeding for

determining the person entitled to, and the amount of, the

credit allowable under section 38 of the Internal Revenue Code

of 1986 with respect to any film covered by such election.

"(3) Election to have credit determined in accordance with

previous litigation. -

"(A) In general. - A taxpayer described in subparagraph (B)

may elect to have this paragraph apply to all films (whether or

not qualified) placed in service in taxable years beginning

before January 1, 1975, and with respect to which an election

under subsection (e)(2) is not made.

"(B) Who may elect. - A taxpayer may make an election under

this paragraph if he has filed an action in any court of

competent jurisdiction, before January 1, 1976, for a

determination of such taxpayer's rights to the allowance of a

credit against tax under section 38 of the Internal Revenue

Code of 1986 for any taxable year beginning before January 1,

1975, with respect to any film.

"(C) Effect of election. - If the taxpayer makes an election

under this paragraph -

"(i) paragraphs (1) and (2) of this subsection, and

subsection (d) shall not apply to any film placed in service

by the taxpayer, and

"(ii) subsection 48(k) of the Internal Revenue Code of 1986

shall not apply to any film placed in service by the taxpayer

in any taxable year beginning before January 1, 1975, and

with respect to which an election under subsection (e)(2) is

not made,

and the right of the taxpayer to the allowance of a credit

against tax under section 38 of such Code with respect to any

film placed in service in any taxable year beginning before

January 1, 1975, and as to which an election under subsection

(e)(2) is not made, shall be determined as though this section

(other than this paragraph) has not been enacted.

"(D) Rules relating to elections. - An election under this

paragraph shall be made not later than the day which is 90 days

after the date of the enactment of this Act [Oct. 4, 1976], by

filing a notification of such election with the national office

of the Internal Revenue Service. Such an election, once made,

shall be irrevocable."

ENTITLEMENT TO CREDIT

Section 804(d) of Pub. L. 94-455, as amended by Pub. L. 99-514,

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

(1) of section 48(k) of the Internal Revenue Code of 1986 [formerly

I.R.C. 1954] (relating to entitlement to credit) shall apply to any

motion picture film or video tape placed in service in any taxable

year beginning before January 1, 1975."

INCREASE IN BASIS OF PROPERTY PLACED IN SERVICE BEFORE JANUARY 1,

1964

Section 203(a)(2) of Pub. L. 88-272, as amended by Pub. L.

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

"(A) The basis of any section 38 property (as defined in section

48(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954])

placed in service before January 1, 1964, shall be increased, under

regulations prescribed by the Secretary of the Treasury or his

delegate, by an amount equal to 7 percent of the qualified

investment with respect to such property under section 46(c) of the

Internal Revenue Code of 1986. If there has been any increase with

respect to such property under section 48(g)(2) of such Code, the

increase under the preceding sentence shall be appropriately

reduced therefor.

"(B) If a lessor made the election provided by section 48(d) of

the Internal Revenue Code of 1986 with respect to property placed

in service before January 1, 1964 -

"(i) subparagraph (A) shall not apply with respect to such

property, but

"(ii) under regulations prescribed by the Secretary of the

Treasury or his delegate, the deductions otherwise allowable

under section 162 of such Code to the lessee for amounts paid to

the lessor under the lease (or, if such lessee has purchased such

property, the basis of such property) shall be adjusted in a

manner consistent with subparagraph (A).

"(C) The adjustments under this paragraph shall be made as of the

first day of the taxpayer's first taxable year which begins after

December 31, 1963."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 29, 50, 168, 409, 1274A

of this title.

-End-

-CITE-

26 USC Sec. 49 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

Sec. 49. At-risk rules

-STATUTE-

(a) General rule

(1) Certain nonrecourse financing excluded from credit base

(A) Limitation

The credit base of any property to which this paragraph

applies shall be reduced by the nonqualified nonrecourse

financing with respect to such credit base (as of the close of

the taxable year in which placed in service).

(B) Property to which paragraph applies

This paragraph applies to any property which -

(i) is placed in service during the taxable year by a

taxpayer described in section 465(a)(1), and

(ii) is used in connection with an activity with respect to

which any loss is subject to limitation under section 465.

(C) Credit base defined

For purposes of this paragraph, the term "credit base" means

-

(i) the portion of the basis of any qualified rehabilitated

building attributable to qualified rehabilitation

expenditures,

(ii) the basis of any energy property, and

(iii) the amortizable basis of any qualified timber

property.

(D) Nonqualified nonrecourse financing

(i) In general

For purposes of this paragraph and paragraph (2), the term

"nonqualified nonrecourse financing" means any nonrecourse

financing which is not qualified commercial financing.

(ii) Qualified commercial financing

For purposes of this paragraph, the term "qualified

commercial financing" means any financing with respect to any

property if -

(I) such property is acquired by the taxpayer from a

person who is not a related person,

(II) the amount of the nonrecourse financing with respect

to such property does not exceed 80 percent of the credit

base of such property, and

(III) such financing is borrowed from a qualified person

or represents a loan from any Federal, State, or local

government or instrumentality thereof, or is guaranteed by

any Federal, State, or local government.

Such term shall not include any convertible debt.

(iii) Nonrecourse financing

For purposes of this subparagraph, the term "nonrecourse

financing" includes -

(I) any amount with respect to which the taxpayer is

protected against loss through guarantees, stop-loss

agreements, or other similar arrangements, and

(II) except to the extent provided in regulations, any

amount borrowed from a person who has an interest (other

than as a creditor) in the activity in which the property

is used or from a related person to a person (other than

the taxpayer) having such an interest.

In the case of amounts borrowed by a corporation from a

shareholder, subclause (II) shall not apply to an interest as

a share-holder.(!1)

(iv) Qualified person

For purposes of this paragraph, the term "qualified person"

means any person which is actively and regularly engaged in

the business of lending money and which is not -

(I) a related person with respect to the taxpayer,

(II) a person from which the taxpayer acquired the

property (or a related person to such person), or

(III) a person who receives a fee with respect to the

taxpayer's investment in the property (or a related person

to such person).

(v) Related person

For purposes of this subparagraph, the term "related

person" has the meaning given such term by section

465(b)(3)(C). Except as otherwise provided in regulations

prescribed by the Secretary, the determination of whether a

person is a related person shall be made as of the close of

the taxable year in which the property is placed in service.

(E) Application to partnerships and S corporations

For purposes of this paragraph and paragraph (2) -

(i) In general

Except as otherwise provided in this subparagraph, in the

case of any partnership or S corporation, the determination

of whether a partner's or shareholder's allocable share of

any financing is nonqualified nonrecourse financing shall be

made at the partner or shareholder level.

(ii) Special rule for certain recourse financing of S

corporation

A shareholder of an S corporation shall be treated as

liable for his allocable share of any financing provided by a

qualified person to such corporation if -

(I) such financing is recourse financing (determined at

the corporate level), and

(II) such financing is provided with respect to qualified

business property of such corporation.

(iii) Qualified business property

For purposes of clause (ii), the term "qualified business

property" means any property if -

(I) such property is used by the corporation in the

active conduct of a trade or business,

(II) during the entire 12-month period ending on the last

day of the taxable year, such corporation had at least 3

full-time employees who were not owner-employees (as

defined in section 465(c)(7)(E)(i)) and substantially all

the services of whom were services directly related to such

trade or business, and

(III) during the entire 12-month period ending on the

last day of such taxable year, such corporation had at

least 1 full-time employee substantially all of the

services of whom were in the active management of the trade

or business.

(iv) Determination of allocable share

The determination of any partner's or shareholder's

allocable share of any financing shall be made in the same

manner as the credit allowable by section 38 with respect to

such property.

(F) Special rules for energy property

Rules similar to the rules of subparagraph (F) of section

46(c)(8) (as in effect on the day before the date of the

enactment of the Revenue Reconciliation Act of 1990) shall

apply for purposes of this paragraph.

(2) Subsequent decreases in nonqualified nonrecourse financing

with respect to the property

(A) In general

If, at the close of a taxable year following the taxable year

in which the property was placed in service, there is a net

decrease in the amount of nonqualified nonrecourse financing

with respect to such property, such net decrease shall be taken

into account as an increase in the credit base for such

property in accordance with subparagraph (C).

(B) Certain transactions not taken into account

For purposes of this paragraph, nonqualified nonrecourse

financing shall not be treated as decreased through the

surrender or other use of property financed by nonqualified

nonrecourse financing.

(C) Manner in which taken into account

(i) Credit determined by reference to taxable year property

placed in service

For purposes of determining the amount of credit allowable

under section 38 and the amount of credit subject to the

early disposition or cessation rules under section 50(a), any

increase in a taxpayer's credit base for any property by

reason of this paragraph shall be taken into account as if it

were property placed in service by the taxpayer in the

taxable year in which the property referred to in

subparagraph (A) was first placed in service.

(ii) Credit allowed for year of decrease in nonqualified

nonrecourse financing

Any credit allowable under this subpart for any increase in

qualified investment by reason of this paragraph shall be

treated as earned during the taxable year of the decrease in

the amount of nonqualified nonrecourse financing.

(b) Increases in nonqualified nonrecourse financing

(1) In general

If, as of the close of the taxable year, there is a net

increase with respect to the taxpayer in the amount of

nonqualified nonrecourse financing (within the meaning of

subsection (a)(1)) with respect to any property to which

subsection (a)(1) applied, then the tax under this chapter for

such taxable year shall be increased by an amount equal to the

aggregate decrease in credits allowed under section 38 for all

prior taxable years which would have resulted from reducing the

credit base (as defined in subsection (a)(1)(C)) taken into

account with respect to such property by the amount of such net

increase. For purposes of determining the amount of credit

subject to the early disposition or cessation rules of section

50(a), the net increase in the amount of the nonqualified

nonrecourse financing with respect to the property shall be

treated as reducing the property's credit base in the year in

which the property was first placed in service.

(2) Transfers of debt more than 1 year after initial borrowing

not treated as increasing nonqualified nonrecourse financing

For purposes of paragraph (1), the amount of nonqualified

nonrecourse financing (within the meaning of subsection

(a)(1)(D)) with respect to the taxpayer shall not be treated as

increased by reason of a transfer of (or agreement to transfer)

any evidence of any indebtedness if such transfer occurs (or such

agreement is entered into) more than 1 year after the date such

indebtedness was incurred.

(3) Special rules for certain energy property

Rules similar to the rules of section 47(d)(3) (as in effect on

the day before the date of the enactment of the Revenue

Reconciliation Act of 1990) shall apply for purposes of this

subsection.

(4) Special rule

Any increase in tax under paragraph (1) shall not be treated as

tax imposed by this chapter for purposes of determining the

amount of any credit allowable under this chapter.

-SOURCE-

(Added Pub. L. 99-514, title II, Sec. 211(a), Oct. 22, 1986, 100

Stat. 2166; amended Pub. L. 100-647, title I, Sec. 1002(e)(1)-(3),

(8)(B), Nov. 10, 1988, 102 Stat. 3367, 3369; Pub. L. 101-508, title

XI, Sec. 11813(a), Nov. 5, 1990, 104 Stat. 1388-543; Pub. L.

105-206, title VI, Sec. 6004(g)(6), July 22, 1998, 112 Stat. 796.)

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of the Revenue Reconciliation Act of

1990, referred to in subsecs. (a)(1)(F) and (b)(3), is the date of

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

-MISC1-

PRIOR PROVISIONS

A prior section 49, Pub. L. 91-172, title VII, Sec. 703(a), Dec.

30, 1969, 83 Stat. 660; Pub. L. 92-178, title I, Sec.

101(b)(1)-(4), Dec. 10, 1971, 85 Stat. 498, 499, related to

termination of rules for computing credit for investment in certain

depreciable property for period beginning Apr. 19, 1969, and ending

during 1971, prior to repeal by Pub. L. 95-600, title III, Sec.

312(c)(1), Nov. 6, 1978, 92 Stat. 2826, applicable to taxable years

ending after Dec. 31, 1978.

AMENDMENTS

1998 - Subsec. (b)(4). Pub. L. 105-206 substituted "this chapter"

for "subpart A, B, D, or G".

1990 - Pub. L. 101-508, Sec. 11813(a), amended section generally,

substituting section catchline for one which read: "Termination of

regular percentage" and in text substituting present provisions for

provisions relating to the nonapplicability of the regular

percentage to any property placed in service after Dec. 31, 1985,

for purposes of determining the investment tax credit, exceptions

to such rule, the 35 percent reduction in credit for taxable years

after 1986, the full basis adjustment in determining investment tax

credit, and the definition of transition property and treatment of

progress expenditures.

1988 - Subsec. (c)(4)(B). Pub. L. 100-647, Sec. 1002(e)(2),

substituted "years" for "year" in heading and amended text

generally. Prior to amendment, text read as follows: "The amount of

the reduction of the regular investment credit under paragraph (3)

-

"(i) may not be carried back to any taxable year, but

"(ii) shall be added to the carryforwards from the taxable year

before applying paragraph (2)."

Subsec. (c)(5)(B)(i). Pub. L. 100-647, Sec. 1002(e)(3), amended

cl. (i) generally. Prior to amendment, cl. (i) read as follows:

"The term 'regular investment credit' has the meaning given such

term by section 48(o)".

Subsec. (c)(5)(C). Pub. L. 100-647, Sec. 1002(e)(8)(B), struck

out subpar. (C) which related to portion of credits attributable to

regular investment credit.

Subsec. (d)(1). Pub. L. 100-647, Sec. 1002(e)(1), amended par.

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

the case of periods after December 31, 1985, section 48(q)

(relating to basis adjustment to section 38 property) shall be

applied with respect to transaction property -

"(A) by substituting '100 percent' for '50 percent' in

paragraph (1), and

"(B) without regard to paragraph (4) thereof (relating to

election of reduced credit in lieu of basis adjustment)."

EFFECTIVE DATE OF 1998 AMENDMENT

Amendment by Pub. L. 105-206 effective, except as otherwise

provided, as if included in the provisions of the Taxpayer Relief

Act of 1997, Pub. L. 105-34, to which such amendment relates, see

section 6024 of Pub. L. 105-206, set out as a note under section 1

of this title.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by Pub. L. 101-508 applicable to property placed in

service after Dec. 31, 1990, but not applicable to any transition

property (as defined in section 49(e) of this title), any property

with respect to which qualified progress expenditures were

previously taken into account under section 46(d) of this title,

and any property described in section 46(b)(2)(C) of this title, as

such sections were in effect on Nov. 4, 1990, see section 11813(c)

of Pub. L. 101-508, set out as a note under section 29 of this

title.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by section 1002(e)(1)-(3) of Pub. L. 100-647 effective,

except as otherwise provided, as if included in the provision of

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

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

under section 1 of this title.

Amendment by section 1002(e)(8)(B) of Pub. L. 100-647 applicable

to taxable years beginning after Dec. 31, 1983, and to carrybacks

from such years, see section 1002(e)(8)(C) of Pub. L. 100-647, set

out as a note under section 38 of this title.

EFFECTIVE DATE OF 1986 AMENDMENT

Section 211(e) of Pub. L. 99-514, as amended by Pub. L. 100-647,

title I, Sec. 1002(e)(4)-(7), Nov. 10, 1988, 102 Stat. 3367, 3368,

provided that:

"(1) In general. - Except as provided in this subsection, the

amendments made by this section [enacting this section and

provisions set out below] shall apply to property placed in service

after December 31, 1985, in taxable years ending after such date.

Section 49(c) of the Internal Revenue Code of 1986 (as added by

subsection (a)) shall apply to taxable years ending after June 30,

1987, and to amounts carried to such taxable years.

"(2) Exceptions for certain films. - For purposes of determining

whether any property is transition property within the meaning of

section 49(e) of the Internal Revenue Code of 1986 -

"(A) in the case of any motion picture or television film,

construction shall be treated as including production for

purposes of section 203(b)(1) of this Act [enacting provisions

set out as a note under section 168 of this title], and written

contemporary evidence of an agreement (in accordance with

industry practice) shall be treated as a written binding contract

for such purposes,

"(B) in the case of any television film, a license agreement or

agreement for production services between a television network

and a producer shall be treated as a binding contract for

purposes of section 203(b)(1)(A) of this Act, and

"(C) a motion picture film shall be treated as described in

section 203(b)(1)(A) of this Act if -

"(i) funds were raised pursuant to a public offering before

September 26, 1985, for the production of such film,

"(ii) 40 percent of the funds raised pursuant to such public

offering are being spent on films the production of which

commenced before such date, and

"(iii) all of the films funded by such public offering are

required to be distributed pursuant to distribution agreements

entered into before September 26, 1985.

"(3) Normalization rules. - The provisions of subsection (b) [see

Normalization Rules note below] shall apply to any violation of the

normalization requirements under paragraph (1) or (2) of section

46(f) of the Internal Revenue Code of 1986 occurring in taxable

years ending after December 31, 1985.

"(4) Additional exceptions. -

"(A) Subsections (c) and (d) of section 49 of the Internal

Revenue Code of 1986 shall not apply to any continuous caster

facility for slabs and blooms which is subject to a lease and

which is part of a project the second phase of which is a

continuous slab caster which was placed in service before

December 31, 1985.

"(B) For purposes of determining whether an automobile

manufacturing facility (including equipment and incidental

appurtenances) is transition property within the meaning of

section 49(e), property with respect to which the Board of

Directors of an automobile manufacturer formally approved the

plan for the project on January 7, 1985 shall be treated as

transition property and subsections (c) and (d) of section 49 of

such Code shall not apply to such property, but only with respect

to $70,000,000 of regular investment tax credits.

"(C) Any solid waste disposal facility which will process and

incinerate solid waste of one or more public or private entities

including Dakota County, Minnesota, and with respect to which a

bond carryforward from 1985 was elected in an amount equal to

$12,500,000 shall be treated as transition property within the

meaning of section 49(e) of the Internal Revenue Code of 1986.

"(D) For purposes of section 49 of such Code, the following

property shall be treated as transition property:

"(i) 2 catamarans built by a shipbuilder incorporated in the

State of Washington in 1964, the contracts for which were

signed on April 22, 1986 and November 12, 1985, and 1 barge

built by such shipbuilder the contract for which was signed on

August 7, 1985.

"(ii) 2 large passenger ocean-going United States flag cruise

ships with a passenger rated capacity of up to 250 which are

built by the shipbuilder described in clause (i), which are the

first such ships built in the United States since 1952, and

which were designed at the request of a Pacific Coast cruise

line pursuant to a contract entered into in October 1985. This

clause shall apply only to that portion of the cost of each

ship which does not exceed $40,000,000.

"(iii) Property placed in service during 1986 by Satellite

Industries, Inc., with headquarters in Minneapolis, Minnesota,

to the extent that the cost of such property does not exceed

$1,950,000.

"(E) Subsections (c) and (d) of section 49 of such Code shall

not apply to property described in section 204(a)(4) of this Act

[enacting provisions set out as a note under section 168 of this

title]."

SAVINGS PROVISION

For provisions that nothing in amendment by 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.

NORMALIZATION RULES

Section 211(b) of Pub. L. 99-514 provided that: "If, for any

taxable year beginning after December 31, 1985, the requirements of

paragraph (1) or (2) of section 46(f) of the Internal Revenue Code

of 1986 are not met with respect to public utility property to

which the regular percentage applied for purposes of determining

the amount of the investment tax credit -

"(1) all credits for open taxable years as of the time of the

final determination referred to in section 46(f)(4)(A) of such

Code shall be recaptured, and

"(2) if the amount of the taxpayer's unamortized credits (or

the credits not previously restored to rate base) with respect to

such property (whether or not for open years) exceeds the amount

referred to in paragraph (1), the taxpayer's tax for the taxable

year shall be increased by the amount of such excess.

If any portion of the excess described in paragraph (2) is

attributable to a credit which is allowable as a carryover to a

taxable year beginning after December 31, 1985, in lieu of applying

paragraph (2) with respect to such portion, the amount of such

carryover shall be reduced by the amount of such portion. Rules

similar to the rules of this subsection shall apply in the case of

any property with respect to which the requirements of section

46(f)(9) of such Code are met."

EXCEPTION FOR CERTAIN AIRCRAFT USED IN ALASKA

Section 211(d) of Pub. L. 99-514 provided that:

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

and provisions set out above] shall not apply to property

originally placed in service after December 29, 1982, and before

August 1, 1985, by a corporation incorporated in Alaska on May 21,

1953, and used by it -

"(A) in part, for the transportation of mail for the United

States Postal Service in the State of Alaska, and

"(B) in part, to provide air service in the State of Alaska on

routes which had previously been served by an air carrier that

received compensation from the Civil Aeronautics Board for

providing service.

"(2) In the case of property described in subparagraph (A) -

"(A) such property shall be treated as recovery property

described in section 208(d)(5) of the Tax Equity and Fiscal

Responsibility Act of 1982 ('TEFRA') [section 208(d)(5) of Pub.

L. 97-248, enacting provisions set out as a note under section

168 of this title];

"(B) '48 months' shall be substituted for '3 months' each place

it appears in applying -

"(i) section 48(b)(2)(B) of the Code [26 U.S.C. 48(b)(2)(B)],

and

"(ii) section 168(f)(8)(D) of the Code [26 U.S.C.

168(f)(8)(D)] (as in effect after the amendments made by the

Technical Corrections Act of 1982 [Pub. L. 97-448] but before

the amendments made by TEFRA); and

"(C) the limitation of section 168(f)(8)(D)(ii)(III) (as then

in effect) shall be read by substituting 'the lessee's original

cost basis.', for 'the adjusted basis of the lessee at the time

of the lease.'

"(3) The aggregate amount of property to which this paragraph

shall apply shall not exceed $60,000,000."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 29, 42, 43, 465, 773,

1371 of this title.

-FOOTNOTE-

(!1) So in original. Probably should not be hyphenated.

-End-

-CITE-

26 USC Sec. 50 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

Sec. 50. Other special rules

-STATUTE-

(a) Recapture in case of dispositions, etc.

Under regulations prescribed by the Secretary -

(1) Early disposition, etc.

(A) General rule

If, during any taxable year, investment credit property is

disposed of, or otherwise ceases to be investment credit

property with respect to the taxpayer, before the close of the

recapture period, then the tax under this chapter for such

taxable year shall be increased by the recapture percentage of

the aggregate decrease in the credits allowed under section 38

for all prior taxable years which would have resulted solely

from reducing to zero any credit determined under this subpart

with respect to such property.

(B) Recapture percentage

For purposes of subparagraph (A), the recapture percentage

shall be determined in accordance with the following table:

If the property ceases to be 2The recapture

investment credit property within -

percentage is:

--------------------------------------------------------------------

(i) One full year after placed in service 100

(ii) One full year after the close of the 80

period described in clause (i)

(iii) One full year after the close of the 60

period described in clause (ii)

(iv) One full year after the close of the 40

period described in clause (iii)

(v) One full year after the close of the 20

period described in clause (iv)

--------------------------------------------------------------------

(2) Property ceases to qualify for progress expenditures

(A) In general

If during any taxable year any building to which section

47(d) applied ceases (by reason of sale or other disposition,

cancellation or abandonment of contract, or otherwise) to be,

with respect to the taxpayer, property which, when placed in

service, will be a qualified rehabilitated building, then the

tax under this chapter for such taxable year shall be increased

by an amount equal to the aggregate decrease in the credits

allowed under section 38 for all prior taxable years which

would have resulted solely from reducing to zero the credit

determined under this subpart with respect to such building.

(B) Certain excess credit recaptured

Any amount which would have been applied as a reduction under

paragraph (2) of section 47(b) but for the fact that a

reduction under such paragraph cannot reduce the amount taken

into account under section 47(b)(1) below zero shall be treated

as an amount required to be recaptured under subparagraph (A)

for the taxable year during which the building is placed in

service.

(C) Certain sales and leasebacks

Under regulations prescribed by the Secretary, a sale by, and

leaseback to, a taxpayer who, when the property is placed in

service, will be a lessee to whom the rules referred to in

subsection (d)(5) apply shall not be treated as a cessation

described in subparagraph (A) to the extent that the amount

which will be passed through to the lessee under such rules

with respect to such property is not less than the qualified

rehabilitation expenditures properly taken into account by the

lessee under section 47(d) with respect to such property.

(D) Coordination with paragraph (1)

If, after property is placed in service, there is a

disposition or other cessation described in paragraph (1), then

paragraph (1) shall be applied as if any credit which was

allowable by reason of section 47(d) and which has not been

required to be recaptured before such disposition, cessation,

or change in use were allowable for the taxable year the

property was placed in service.

(E) Special rules

Rules similar to the rules of this paragraph shall apply in

cases where qualified progress expenditures were taken into

account under the rules referred to in section 48(a)(5).

(3) Carrybacks and carryovers adjusted

In the case of any cessation described in paragraph (1) or (2),

the carrybacks and carryovers under section 39 shall be adjusted

by reason of such cessation.

(4) Subsection not to apply in certain cases

Paragraphs (1) and (2) shall not apply to -

(A) a transfer by reason of death, or

(B) a transaction to which section 381(a) applies.

For purposes of this subsection, property shall not be treated as

ceasing to be investment credit property with respect to the

taxpayer by reason of a mere change in the form of conducting the

trade or business so long as the property is retained in such

trade or business as investment credit property and the taxpayer

retains a substantial interest in such trade or business.

(5) Definitions and special rules

(A) Investment credit property

For purposes of this subsection, the term "investment credit

property" means any property eligible for a credit determined

under this subpart.

(B) Transfer between spouses or incident to divorce

In the case of any transfer described in subsection (a) of

section 1041 -

(i) the foregoing provisions of this subsection shall not

apply, and

(ii) the same tax treatment under this subsection with

respect to the transferred property shall apply to the

transferee as would have applied to the transferor.

(C) Special rule

Any increase in tax under paragraph (1) or (2) shall not be

treated as tax imposed by this chapter for purposes of

determining the amount of any credit allowable under this

chapter.

(b) Certain property not eligible

No credit shall be determined under this subpart with respect to

-

(1) Property used outside United States

(A) In general

Except as provided in subparagraph (B), no credit shall be

determined under this subpart with respect to any property

which is used predominantly outside the United States.

(B) Exceptions

Subparagraph (A) shall not apply to any property described in

section 168(g)(4).

(2) Property used for lodging

No credit shall be determined under this subpart with respect

to any property which is used predominantly to furnish lodging or

in connection with the furnishing of lodging. The preceding

sentence shall not apply to -

(A) nonlodging commercial facilities which are available to

persons not using the lodging facilities on the same basis as

they are available to persons using the lodging facilities.(!1)

(B) property used by a hotel or motel in connection with the

trade or business of furnishing lodging where the predominant

portion of the accommodations is used by transients;

(C) a certified historic structure to the extent of that

portion of the basis which is attributable to qualified

rehabilitation expenditures; and

(D) any energy property.

(3) Property used by certain tax-exempt organization

No credit shall be determined under this subpart with respect

to any property used by an organization (other than a cooperative

described in section 521) which is exempt from the tax imposed by

this chapter unless such property is used predominantly in an

unrelated trade or business the income of which is subject to tax

under section 511. If the property is debt-financed property (as

defined in section 514(b)), the amount taken into account for

purposes of determining the amount of the credit under this

subpart with respect to such property shall be that percentage of

the amount (which but for this paragraph would be so taken into

account) which is the same percentage as is used under section

514(a), for the year the property is placed in service, in

computing the amount of gross income to be taken into account

during such taxable year with respect to such property. If any

qualified rehabilitated building is used by the tax-exempt

organization pursuant to a lease, this paragraph shall not apply

for purposes of determining the amount of the rehabilitation

credit.

(4) Property used by governmental units or foreign persons or

entities

(A) In general

No credit shall be determined under this subpart with respect

to any property used -

(i) by the United States, any State or political

subdivision thereof, any possession of the United States, or

any agency or instrumentality of any of the foregoing, or

(ii) by any foreign person or entity (as defined in section

168(h)(2)(C)), but only with respect to property to which

section 168(h)(2)(A)(iii) applies (determined after the

application of section 168(h)(2)(B)).

(B) Exception for short-term leases

This paragraph and paragraph (3) shall not apply to any

property by reason of use under a lease with a term of less

than 6 months (determined under section 168(i)(3)).

(C) Exception for qualified rehabilitated buildings leased to

governments, etc.

If any qualified rehabilitated building is leased to a

governmental unit (or a foreign person or entity) this

paragraph shall not apply for purposes of determining the

rehabilitation credit with respect to such building.

(D) Special rules for partnerships, etc.

For purposes of this paragraph and paragraph (3), rules

similar to the rules of paragraphs (5) and (6) of section

168(h) shall apply.

(E) Cross reference

For special rules for the application of this paragraph and

paragraph (3), see section 168(h).

(c) Basis adjustment to investment credit property

(1) In general

For purposes of this subtitle, if a credit is determined under

this subpart with respect to any property, the basis of such

property shall be reduced by the amount of the credit so

determined.

(2) Certain dispositions

If during any taxable year there is a recapture amount

determined with respect to any property the basis of which was

reduced under paragraph (1), the basis of such property

(immediately before the event resulting in such recapture) shall

be increased by an amount equal to such recapture amount. For

purposes of the preceding sentence, the term "recapture amount"

means any increase in tax (or adjustment in carrybacks or

carryovers) determined under subsection (a).

(3) Special rule

In the case of any energy credit or reforestation credit -

(A) only 50 percent of such credit shall be taken into

account under paragraph (1), and

(B) only 50 percent of any recapture amount attributable to

such credit shall be taken into account under paragraph (2).

(4) Recapture of reductions

(A) In general

For purposes of sections 1245 and 1250, any reduction under

this subsection shall be treated as a deduction allowed for

depreciation.

(B) Special rule for section 1250

For purposes of section 1250(b), the determination of what

would have been the depreciation adjustments under the straight

line method shall be made as if there had been no reduction

under this section.

(5) Adjustment in basis of interest in partnership or S

corporation

The adjusted basis of -

(A) a partner's interest in a partnership, and

(B) stock in an S corporation,

shall be appropriately adjusted to take into account adjustments

made under this subsection in the basis of property held by the

partnership or S corporation (as the case may be).

(d) Certain rules made applicable

For purposes of this subpart, rules similar to the rules of the

following provisions (as in effect on the day before the date of

the enactment of the Revenue Reconciliation Act of 1990) shall

apply:

(1) Section 46(e) (relating to limitations with respect to

certain persons).

(2) Section 46(f) (relating to limitation in case of certain

regulated companies).

(3) Section 46(h) (relating to special rules for cooperatives).

(4) Paragraphs (2) and (3) of section 48(b) (relating to

special rule for sale-leasebacks).

(5) Section 48(d) (relating to certain leased property).

(6) Section 48(f) (relating to estates and trusts).

(7) Section 48(r) (relating to certain 501(d) organizations).

Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to

in paragraph (1) of this subsection shall not apply to any taxable

year beginning after December 31, 1995.

-SOURCE-

(Added Pub. L. 101-508, title XI, Sec. 11813(a), Nov. 5, 1990, 104

Stat. 1388-546; amended Pub. L. 104-188, title I, Secs. 1616(b)(1),

1702(h)(11), 1704(t)(29), Aug. 20, 1996, 110 Stat. 1856, 1874,

1889; Pub. L. 105-206, title VI, Sec. 6004(g)(7), July 22, 1998,

112 Stat. 796.)

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of the Revenue Reconciliation Act of

1990, referred to in subsec. (d), is the date of enactment of Pub.

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

-MISC1-

PRIOR PROVISIONS

A prior section 50, Pub. L. 92-178, title I, Sec. 101(a), Dec.

10, 1971, 85 Stat. 498, related to restoration of credit for

investment in certain depreciable property, prior to repeal by Pub.

L. 95-600, title III, Sec. 312(c)(1), Nov. 6, 1978, 92 Stat. 2826,

applicable to taxable years ending after Dec. 31, 1978.

AMENDMENTS

1998 - Subsec. (a)(5)(C). Pub. L. 105-206 substituted "this

chapter" for "subpart A, B, D, or G".

1996 - Subsec. (a)(2)(C). Pub. L. 104-188, Sec. 1704(t)(29),

substituted "subsection (d)(5)" for "subsection (c)(4)".

Subsec. (a)(2)(E). Pub. L. 104-188, Sec. 1702(h)(11), substituted

"48(a)(5)" for "48(a)(5)(A)".

Subsec. (d). Pub. L. 104-188, Sec. 1616(b)(1), inserted closing

provisions.

EFFECTIVE DATE OF 1998 AMENDMENT

Amendment by Pub. L. 105-206 effective, except as otherwise

provided, as if included in the provisions of the Taxpayer Relief

Act of 1997, Pub. L. 105-34, to which such amendment relates, see

section 6024 of Pub. L. 105-206, set out as a note under section 1

of this title.

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by section 1616(b)(1) of Pub. L. 104-188 applicable to

taxable years beginning after Dec. 31, 1995, see section 1616(c) of

Pub. L. 104-188, set out as a note under section 593 of this title.

Amendment by section 1702(h)(11) of Pub. L. 104-188 effective,

except as otherwise expressly provided, as if included in the

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

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

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

this title.

EFFECTIVE DATE

Section applicable to property placed in service after Dec. 31,

1990, but not applicable to any transition property (as defined in

section 49(e) of this title), any property with respect to which

qualified progress expenditures were previously taken into account

under section 46(d) of this title, and any property described in

section 46(b)(2)(C) of this title, as such sections were in effect

on Nov. 4, 1990, see section 11813(c) of Pub. L. 101-508, set out

as an Effective Date of 1990 Amendment note under section 29 of

this title.

SAVINGS PROVISION

For provisions that nothing in this section 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.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 29, 30, 47, 49, 55, 179,

179A, 196, 312, 774, 1371, 1503 of this title.

-FOOTNOTE-

(!1) So in original. The period probably should be a semicolon.

-End-

-CITE-

26 USC [Secs. 50A, 50B 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart E - Rules for Computing Investment Credit

-HEAD-

[Secs. 50A, 50B. Repealed. Pub. L. 98-369, div. A, title IV, Sec.

474(m)(2), July 18, 1984, 98 Stat. 833]

-MISC1-

Section 50A, added Pub. L. 92-178, title VI, Sec. 601(b), Dec.

10, 1971, 85 Stat. 554; amended Pub. L. 93-406, title II, Secs.

2001(g)(2)(B), 2002(g)(2), 2005(c)(4), Sept. 2, 1974, 88 Stat. 957,

968, 991; Pub. L. 94-12, title IV, Sec. 401(a)(1), (2), Mar. 29,

1975, 89 Stat. 45; Pub. L. 94-401, Sec. 4(a), Sept. 7, 1976, 90

Stat. 1217; Pub. L. 94-455, title V, Sec. 503(b)(4), title XIX,

Secs. 1901(a)(6), (b)(1)(D), 1906(b)(13)(A), title XXI, Sec.

2107(a)(1)-(3), (b), (c), Oct. 4, 1976, 90 Stat. 1562, 1765, 1790,

1834, 1903, 1904; Pub. L. 95-600, title III, Sec. 322(a)-(c), Nov.

6, 1978, 92 Stat. 2836, 2837; Pub. L. 96-178, Sec. 6(c)(1), Jan. 2,

1980, 93 Stat. 1298; Pub. L. 96-222, title I, Sec. 103(a)(7)(D)(i),

Apr. 1, 1980, 94 Stat. 211; Pub. L. 97-34, title II, Sec.

207(c)(1), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97-248, title I,

Sec. 265(b)(2)(A)(ii), Sept. 3, 1982, 96 Stat. 547; Pub. L. 97-354,

Sec. 5(a)(9), Oct. 19, 1982, 96 Stat. 1693, provided for a credit

for expenses of work incentive programs, for the determination of

the amount of that credit, and for the carryover and carryback of

unused credit.

Section 50B, added Pub. L. 92-178, title VI, Sec. 601(b), Dec.

10, 1971, 85 Stat. 556; amended Pub. L. 94-12, title III, Sec.

302(c)(4), title IV, Sec. 401(a)(3)-(5), Mar. 29, 1975, 89 Stat.

44, 46; Pub. L. 94-401, Sec. 4(b), Sept. 7, 1976, 90 Stat. 1218;

Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), title XXI, Sec.

2107(a)(4), (d)-(f), Oct. 4, 1976, 90 Stat. 1834, 1903, 1904; Pub.

L. 95-171, Sec. 1(e), Nov. 12, 1977, 91 Stat. 1353; Pub. L. 95-600,

title III, Sec. 322(d), Nov. 6, 1978, 92 Stat. 2837; Pub. L.

96-178, Secs. 3(a)(1), (3), 6(c)(2), (3), Jan. 2, 1980, 93 Stat.

1295, 1298; Pub. L. 96-222, title I, Sec. 103(a)(5), (7)(C),

(D)(ii), (iii), Apr. 1, 1980, 94 Stat. 209, 211; Pub. L. 96-272,

title II, Sec. 208(b)(1), (2), June 17, 1980, 94 Stat. 526, 527;

Pub. L. 97-34, title II, Sec. 261(b)(2)(B)(i), Aug. 13, 1981, 95

Stat. 261; Pub. L. 97-354, Sec. 5(a)(10), Oct. 19, 1982, 96 Stat.

1693; Pub. L. 101-239, title VII, Sec. 7644, Dec. 19, 1989, 103

Stat. 2381, provided for the definition of terms related to the

expenses of work incentive programs, limitations on such expenses,

and special rules to be applied in connection with the computation

of the credit.

Subsequent to repeal, Pub. L. 101-239, title VII, Sec. 7644(a),

Dec. 19, 1989, 103 Stat. 2381, provided that:

"(a) In General. - So much of subparagraph (A) of section

50B(h)(1) of the Internal Revenue Code of 1954 (as in effect for

taxable years beginning before January 1, 1982) as precedes clause

(i) thereof is amended to read as follows:

" '(A) who has been certified (or for whom a written request

for certification has been made) on or before the day the

individual began work for the taxpayer by the Secretary of Labor

or by the appropriate agency of State or local government as - '.

"(b) Effective Date. - The amendment made by subsection (a) shall

apply for purposes of credits first claimed after March 11, 1987."

EFFECTIVE DATE OF REPEAL

Repeal applicable to taxable years beginning after Dec. 31, 1983,

and to carrybacks from such years, see section 475(a) of Pub. L.

98-369, set out as an Effective Date of 1984 Amendment note under

section 21 of this title.

-End-

-CITE-

26 USC Subpart F - Rules for Computing Work Opportunity

Credit 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart F - Rules for Computing Work Opportunity Credit

-HEAD-

SUBPART F - RULES FOR COMPUTING WORK OPPORTUNITY CREDIT

-MISC1-

Sec.

51. Amount of credit.

51A. Temporary incentives for employing long-term family

assistance recipients.

52. Special rules.

AMENDMENTS

1997 - Pub. L. 105-34, title VIII, Sec. 801(b), Aug. 5, 1997, 111

Stat. 871, added item 51A.

1996 - Pub. L. 104-188, title I, Sec. 1201(e)(2), Aug. 20, 1996,

110 Stat. 1772, substituted "Work Opportunity Credit" for "Targeted

Jobs Credit" in subpart heading.

1984 - Pub. L. 98-369, div. A, title IV, Sec. 474(n)(1), (2),

(p)(9), July 18, 1984, 98 Stat. 833, 838, substituted "F" for "D"

as subpart designation, substituted "Rules for Computing Targeted

Jobs Credit" for "Rules for Computing Credit for Employment of

Certain New Employees" in heading, and struck out item 53

"Limitation based on amount of tax".

-SECREF-

SUBPART REFERRED TO IN OTHER SECTIONS

This subpart is referred to in sections 53, 1400L of this title.

-End-

-CITE-

26 USC Sec. 51 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart F - Rules for Computing Work Opportunity Credit

-HEAD-

Sec. 51. Amount of credit

-STATUTE-

(a) Determination of amount

For purposes of section 38, the amount of the work opportunity

credit determined under this section for the taxable year shall be

equal to 40 percent of the qualified first-year wages for such

year.

(b) Qualified wages defined

For purposes of this subpart -

(1) In general

The term "qualified wages" means the wages paid or incurred by

the employer during the taxable year to individuals who are

members of a targeted group.

(2) Qualified first-year wages

The term "qualified first-year wages" means, with respect to

any individual, qualified wages attributable to service rendered

during the 1-year period beginning with the day the individual

begins work for the employer.

(3) Only first $6,000 of wages per year taken into account

The amount of the qualified first-year wages which may be taken

into account with respect to any individual shall not exceed

$6,000 per year.

(c) Wages defined

For purposes of this subpart -

(1) In general

Except as otherwise provided in this subsection and subsection

(h)(2), the term "wages" has the meaning given to such term by

subsection (b) of section 3306 (determined without regard to any

dollar limitation contained in such section).

(2) On-the-job training and work supplementation payments

(A) Exclusion for employers receiving on-the-job training

payments

The term "wages" shall not include any amounts paid or

incurred by an employer for any period to any individual for

whom the employer receives federally funded payments for

on-the-job training of such individual for such period.

(B) Reduction for work supplementation payments to employers

The amount of wages which would (but for this subparagraph)

be qualified wages under this section for an employer with

respect to an individual for a taxable year shall be reduced by

an amount equal to the amount of the payments made to such

employer (however utilized by such employer) with respect to

such individual for such taxable year under a program

established under section 482(e) (!1) of the Social Security

Act.

(3) Payments for services during labor disputes

If -

(A) the principal place of employment of an individual with

the employer is at a plant or facility, and

(B) there is a strike or lockout involving employees at such

plant or facility,

the term "wages" shall not include any amount paid or incurred by

the employer to such individual for services which are the same

as, or substantially similar to, those services performed by

employees participating in, or affected by, the strike or lockout

during the period of such strike or lockout.

(4) Termination

The term "wages" shall not include any amount paid or incurred

to an individual who begins work for the employer -

(A) after December 31, 1994, and before October 1, 1996, or

(B) after December 31, 2003.

(d) Members of targeted groups

For purposes of this subpart -

(1) In general

An individual is a member of a targeted group if such

individual is -

(A) a qualified IV-A recipient,

(B) a qualified veteran,

(C) a qualified ex-felon,

(D) a high-risk youth,

(E) a vocational rehabilitation referral,

(F) a qualified summer youth employee,

(G) a qualified food stamp recipient, or

(H) a qualified SSI recipient.

(2) Qualified IV-A recipient

(A) In general

The term "qualified IV-A recipient" means any individual who

is certified by the designated local agency as being a member

of a family receiving assistance under a IV-A program for any 9

months during the 18-month period ending on the hiring date.

(B) IV-A program

For purposes of this paragraph, the term "IV-A program" means

any program providing assistance under a State program funded

under part A of title IV of the Social Security Act and any

successor of such program.

(3) Qualified veteran

(A) In general

The term "qualified veteran" means any veteran who is

certified by the designated local agency as being a member of a

family receiving assistance under a food stamp program under

the Food Stamp Act of 1977 for at least a 3-month period ending

during the 12-month period ending on the hiring date.

(B) Veteran

For purposes of subparagraph (A), the term "veteran" means

any individual who is certified by the designated local agency

as -

(i)(I) having served on active duty (other than active duty

for training) in the Armed Forces of the United States for a

period of more than 180 days, or

(II) having been discharged or released from active duty in

the Armed Forces of the United States for a service-connected

disability, and

(ii) not having any day during the 60-day period ending on

the hiring date which was a day of extended active duty in

the Armed Forces of the United States.

For purposes of clause (ii), the term "extended active duty"

means a period of more than 90 days during which the individual

was on active duty (other than active duty for training).

(4) Qualified ex-felon

The term "qualified ex-felon" means any individual who is

certified by the designated local agency -

(A) as having been convicted of a felony under any statute of

the United States or any State,

(B) as having a hiring date which is not more than 1 year

after the last date on which such individual was so convicted

or was released from prison, and

(C) as being a member of a family which had an income during

the 6 months immediately preceding the earlier of the month in

which such income determination occurs or the month in which

the hiring date occurs, which, on an annual basis, would be 70

percent or less of the Bureau of Labor Statistics lower living

standard.

Any determination under subparagraph (C) shall be valid for the

45-day period beginning on the date such determination is made.

(5) High-risk youth

(A) In general

The term "high-risk youth" means any individual who is

certified by the designated local agency -

(i) as having attained age 18 but not age 25 on the hiring

date, and

(ii) as having his principal place of abode within an

empowerment zone, enterprise community, or renewal community.

(B) Youth must continue to reside in zone or community

In the case of a high-risk youth, the term "qualified wages"

shall not include wages paid or incurred for services performed

while such youth's principal place of abode is outside an

empowerment zone, enterprise community, or renewal community.

(6) Vocational rehabilitation referral

The term "vocational rehabilitation referral" means any

individual who is certified by the designated local agency as -

(A) having a physical or mental disability which, for such

individual, constitutes or results in a substantial handicap to

employment, and

(B) having been referred to the employer upon completion of

(or while receiving) rehabilitative services pursuant to -

(i) an individualized written plan for employment under a

State plan for vocational rehabilitation services approved

under the Rehabilitation Act of 1973, or

(ii) a program of vocational rehabilitation carried out

under chapter 31 of title 38, United States Code.

(7) Qualified summer youth employee

(A) In general

The term "qualified summer youth employee" means any

individual -

(i) who performs services for the employer between May 1

and September 15,

(ii) who is certified by the designated local agency as

having attained age 16 but not 18 on the hiring date (or if

later, on May 1 of the calendar year involved),

(iii) who has not been an employee of the employer during

any period prior to the 90-day period described in

subparagraph (B)(i), and

(iv) who is certified by the designated local agency as

having his principal place of abode within an empowerment

zone, enterprise community, or renewal community.

(B) Special rules for determining amount of credit

For purposes of applying this subpart to wages paid or

incurred to any qualified summer youth employee -

(i) subsection (b)(2) shall be applied by substituting "any

90-day period between May 1 and September 15" for "the 1-year

period beginning with the day the individual begins work for

the employer", and

(ii) subsection (b)(3) shall be applied by substituting

"$3,000" for "$6,000".

The preceding sentence shall not apply to an individual who,

with respect to the same employer, is certified as a member of

another targeted group after such individual has been a

qualified summer youth employee.

(C) Youth must continue to reside in zone or community

Paragraph (5)(B) shall apply for purposes of subparagraph

(A)(iv).

(8) Qualified food stamp recipient

(A) In general

The term "qualified food stamp recipient" means any

individual who is certified by the designated local agency -

(i) as having attained age 18 but not age 25 on the hiring

date, and

(ii) as being a member of a family -

(I) receiving assistance under a food stamp program under

the Food Stamp Act of 1977 for the 6-month period ending on

the hiring date, or

(II) receiving such assistance for at least 3 months of

the 5-month period ending on the hiring date, in the case

of a member of a family who ceases to be eligible for such

assistance under section 6(o) of the Food Stamp Act of

1977.

(B) Participation information

Notwithstanding any other provision of law, the Secretary of

the Treasury and the Secretary of Agriculture shall enter into

an agreement to provide information to designated local

agencies with respect to participation in the food stamp

program.

(9) Qualified SSI recipient

The term "qualified SSI recipient" means any individual who is

certified by the designated local agency as receiving

supplemental security income benefits under title XVI of the

Social Security Act (including supplemental security income

benefits of the type described in section 1616 of such Act or

section 212 of Public Law 93-66) for any month ending within the

60-day period ending on the hiring date.

(10) Hiring date

The term "hiring date" means the day the individual is hired by

the employer.

(11) Designated local agency

The term "designated local agency" means a State employment

security agency established in accordance with the Act of June 6,

1933, as amended (29 U.S.C. 49-49n).

(12) Special rules for certifications

(A) In general

An individual shall not be treated as a member of a targeted

group unless -

(i) on or before the day on which such individual begins

work for the employer, the employer has received a

certification from a designated local agency that such

individual is a member of a targeted group, or

(ii)(I) on or before the day the individual is offered

employment with the employer, a pre-screening notice is

completed by the employer with respect to such individual,

and

(II) not later than the 21st day after the individual

begins work for the employer, the employer submits such

notice, signed by the employer and the individual under

penalties of perjury, to the designated local agency as part

of a written request for such a certification from such

agency.

For purposes of this paragraph, the term "pre-screening notice"

means a document (in such form as the Secretary shall

prescribe) which contains information provided by the

individual on the basis of which the employer believes that the

individual is a member of a targeted group.

(B) Incorrect certifications

If -

(i) an individual has been certified by a designated local

agency as a member of a targeted group, and

(ii) such certification is incorrect because it was based

on false information provided by such individual,

the certification shall be revoked and wages paid by the

employer after the date on which notice of revocation is

received by the employer shall not be treated as qualified

wages.

(C) Explanation of denial of request

If a designated local agency denies a request for

certification of membership in a targeted group, such agency

shall provide to the person making such request a written

explanation of the reasons for such denial.

[(e) Repealed. Pub. L. 97-34, title II, Sec. 261(e)(1), Aug. 13,

1981, 95 Stat. 262]

(f) Remuneration must be for trade or business employment

(1) In general

For purposes of this subpart, remuneration paid by an employer

to an employee during any taxable year shall be taken into

account only if more than one-half of the remuneration so paid is

for services performed in a trade or business of the employer.

(2) Special rule for certain determination

Any determination as to whether paragraph (1), or subparagraph

(A) or (B) of subsection (h)(1), applies with respect to any

employee for any taxable year shall be made without regard to

subsections (a) and (b) of section 52.

(g) United States Employment Service to notify employers of

availability of credit

The United States Employment Service, in consultation with the

Internal Revenue Service, shall take such steps as may be necessary

or appropriate to keep employers apprised of the availability of

the work opportunity credit determined under this subpart.

(h) Special rules for agricultural labor and railway labor

For purposes of this subpart -

(1) Unemployment insurance wages

(A) Agricultural labor

If the services performed by any employee for an employer

during more than one-half of any pay period (within the meaning

of section 3306(d)) taken into account with respect to any year

constitute agricultural labor (within the meaning of section

3306(k)), the term "unemployment insurance wages" means, with

respect to the remuneration paid by the employer to such

employee for such year, an amount equal to so much of such

remuneration as constitutes "wages" within the meaning of

section 3121(a), except that the contribution and benefit base

for each calendar year shall be deemed to be $6,000.

(B) Railway labor

If more than one-half of remuneration paid by an employer to

an employee during any year is remuneration for service

described in section 3306(c)(9), the term "unemployment

insurance wages" means, with respect to such employee for such

year, an amount equal to so much of the remuneration paid to

such employee during such year which would be subject to

contributions under section 8(a) of the Railroad Unemployment

Insurance Act (45 U.S.C. 358(a)) if the maximum amount subject

to such contributions were $500 per month.

(2) Wages

In any case to which subparagraph (A) or (B) of paragraph (1)

applies, the term "wages" means unemployment insurance wages

(determined without regard to any dollar limitation).

(i) Certain individuals ineligible

(1) Related individuals

No wages shall be taken into account under subsection (a) with

respect to an individual who -

(A) bears any of the relationships described in paragraphs

(1) through (8) of section 152(a) to the taxpayer, or, if the

taxpayer is a corporation, to an individual who owns, directly

or indirectly, more than 50 percent in value of the outstanding

stock of the corporation, or, if the taxpayer is an entity

other than a corporation, to any individual who owns, directly

or indirectly, more than 50 percent of the capital and profits

interests in the entity,(!2) (determined with the application

of section 267(c)),

(B) if the taxpayer is an estate or trust, is a grantor,

beneficiary, or fiduciary of the estate or trust, or is an

individual who bears any of the relationships described in

paragraphs (1) through (8) of section 152(a) to a grantor,

beneficiary, or fiduciary of the estate or trust, or

(C) is a dependent (described in section 152(a)(9)) of the

taxpayer, or, if the taxpayer is a corporation, of an

individual described in subparagraph (A), or, if the taxpayer

is an estate or trust, of a grantor, beneficiary, or fiduciary

of the estate or trust.

(2) Nonqualifying rehires

No wages shall be taken into account under subsection (a) with

respect to any individual if, prior to the hiring date of such

individual, such individual had been employed by the employer at

any time.

(3) Individuals not meeting minimum employment periods

(A) Reduction of credit for individuals performing fewer than

400 hours of service

In the case of an individual who has performed at least 120

hours, but less than 400 hours, of service for the employer,

subsection (a) shall be applied by substituting "25 percent"

for "40 percent".

(B) Denial of credit for individuals performing fewer than 120

hours of service

No wages shall be taken into account under subsection (a)

with respect to any individual unless such individual has

performed at least 120 hours of service for the employer.

(j) Election to have work opportunity credit not apply

(1) In general

A taxpayer may elect to have this section not apply for any

taxable year.

(2) Time for making election

An election under paragraph (1) for any taxable year may be

made (or revoked) at any time before the expiration of the 3-year

period beginning on the last date prescribed by law for filing

the return for such taxable year (determined without regard to

extensions).

(3) Manner of making election

An election under paragraph (1) (or revocation thereof) shall

be made in such manner as the Secretary may by regulations

prescribe.

(k) Treatment of successor employers; treatment of employees

performing services for other persons

(1) Treatment of successor employers

Under regulations prescribed by the Secretary, in the case of a

successor employer referred to in section 3306(b)(1), the

determination of the amount of the credit under this section with

respect to wages paid by such successor employer shall be made in

the same manner as if such wages were paid by the predecessor

employer referred to in such section.

(2) Treatment of employees performing services for other persons

No credit shall be determined under this section with respect

to remuneration paid by an employer to an employee for services

performed by such employee for another person unless the amount

reasonably expected to be received by the employer for such

services from such other person exceeds the remuneration paid by

the employer to such employee for such services.

-SOURCE-

(Added Pub. L. 95-30, title II, Sec. 202(b), May 23, 1977, 91 Stat.

141; amended Pub. L. 95-600, title III, Sec. 321(a), Nov. 6, 1978,

92 Stat. 2830; Pub. L. 96-222, title I, Sec. 103(a)(6)(A), (E),

(F), (G)(iii)-(ix), Apr. 1, 1980, 94 Stat. 209, 210; Pub. L. 97-34,

title II, Sec. 261(a)-(b)(2)(A), (B)(ii)-(f)(1), Aug. 13, 1981, 95

Stat. 260-262; Pub. L. 97-248, title II, Sec. 233(a)-(d), (f),

Sept. 3, 1982, 96 Stat. 501, 502; Pub. L. 97-448, title I, Sec.

102(l)(1), (3), (4), Jan. 12, 1983, 96 Stat. 2374; Pub. L. 98-369,

div. A, title IV, Sec. 474(p)(1)-(3), title VII, Sec. 712(n), title

X, Sec. 1041(a), (c)(1)-(4), div. B, title VI, Secs. 2638(b),

2663(j)(5)(A), July 18, 1984, 98 Stat. 837, 955, 1042, 1043, 1144,

1171; Pub. L. 99-514, title XVII, Sec. 1701(a)-(c), title XVIII,

Sec. 1878(f)(1), Oct. 22, 1986, 100 Stat. 2772, 2904; Pub. L.

100-203, title X, Sec. 10601(a), Dec. 22, 1987, 101 Stat. 1330-451;

Pub. L. 100-485, title II, Sec. 202(c)(6), Oct. 13, 1988, 102 Stat.

2378; Pub. L. 100-647, title I, Sec. 1017(a), title IV, Sec.

4010(a), (c)(1), (d)(1), Nov. 10, 1988, 102 Stat. 3575, 3655; Pub.

L. 101-239, title VII, Sec. 7103(a), (c)(1), Dec. 19, 1989, 103

Stat. 2305; Pub. L. 101-508, title XI, Sec. 11405(a), Nov. 5, 1990,

104 Stat. 1388-473; Pub. L. 102-227, title I, Sec. 105(a), Dec. 11,

1991, 105 Stat. 1687; Pub. L. 103-66, title XIII, Secs. 13102(a),

13302(d), Aug. 10, 1993, 107 Stat. 420, 556; Pub. L. 104-188, title

I, Sec. 1201(a)-(e)(1), (5), (f), Aug. 20, 1996, 110 Stat.

1768-1772; Pub. L. 104-193, title I, Sec. 110(l)(1), Aug. 22, 1996,

110 Stat. 2173; Pub. L. 105-33, title V, Sec. 5514(a)(1), Aug. 5,

1997, 111 Stat. 620; Pub. L. 105-34, title VI, Sec. 603(a)-(d),

Aug. 5, 1997, 111 Stat. 862; Pub. L. 105-277, div. J, title I, Sec.

1002(a), title IV, Sec. 4006(c)(1), Oct. 21, 1998, 112 Stat.

2681-888, 2681-912; Pub. L. 106-170, title V, Sec. 505(a), (b),

Dec. 17, 1999, 113 Stat. 1921; Pub. L. 106-554, Sec. 1(a)(7) [title

I, Sec. 102(a)-(c), title III, Sec. 316(a)], Dec. 21, 2000, 114

Stat. 2763, 2763A-600, 2763A-644; Pub. L. 107-147, title VI, Sec.

604(a), Mar. 9, 2002, 116 Stat. 59.)

-REFTEXT-

REFERENCES IN TEXT

The Social Security Act, referred to in subsecs. (c)(2)(B) and

(d)(2)(B), (9), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as

amended. Part A of title IV of the Act is classified generally to

part A (Sec. 601 et seq.) of subchapter IV of chapter 7 of Title

42, The Public Health and Welfare. Title XVI of the Act is

classified generally to subchapter XVI (Sec. 1381 et seq.) of

chapter 7 of Title 42. Section 482 of the Act, which was classified

to section 682 of Title 42, was repealed by Pub. L. 104-193, title

I, Sec. 108(e), Aug. 22, 1996, 110 Stat. 2167. Section 1616 of the

Act is classified to section 1382e of Title 42. For complete

classification of this Act to the Code, see section 1305 of Title

42 and Tables.

The Food Stamp Act of 1977, referred to in subsec. (d)(3)(A),

(8)(A)(ii), is Pub. L. 88-525, Aug. 31, 1964, 78 Stat. 703, as

amended, which is classified generally to chapter 51 (Sec. 2011 et

seq.) of Title 7, Agriculture. Section 6(o) of the Act is

classified to section 2015(o) of Title 7. For complete

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

out under section 2011 of Title 7 and Tables.

The Rehabilitation Act of 1973, referred to in subsec.

(d)(6)(B)(i), is Pub. L. 93-112, Sept. 26, 1973, 87 Stat. 355, as

amended, which is classified generally to chapter 16 (Sec. 701 et

seq.) of Title 29, Labor. For complete classification of this Act

to the Code, see Short Title note set out under section 701 of

Title 29 and Tables.

Section 212 of Public Law 93-66, referred to in subsec. (d)(9),

is set out as a note under section 1382 of Title 42, The Public

Health and Welfare.

Act of June 6, 1933, referred to in subsec. (d)(11), is act June

6, 1933, ch. 49, 48 Stat. 113, as amended, popularly known as the

Wagner-Peyser Act, which is classified generally to chapter 4B

(Sec. 49 et seq.) of Title 29, Labor. For complete classification

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

49 of Title 29 and Tables.

-MISC1-

PRIOR PROVISIONS

A prior section 51, added Pub. L. 90-364, title I, Sec. 102(a),

June 28, 1968, 82 Stat. 252; amended Pub. L. 91-53, Sec. 5(a), Aug.

7, 1969, 83 Stat. 93; Pub. L. 91-172, title III, Sec. 301(b)(5),

title VII, Sec. 701(a), Dec. 30, 1969, 83 Stat. 585, 657, related

to the imposition of a tax surcharge, prior to repeal by Pub. L.

94-455, title XIX, Sec. 1901(a)(7), Oct. 4, 1976, 90 Stat. 1765.

AMENDMENTS

2002 - Subsec. (c)(4)(B). Pub. L. 107-147 substituted "2003" for

"2001".

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

III, Sec. 316(a)], substituted "program funded" for "plan approved"

and struck out "(relating to assistance for needy families with

minor children)" after "Social Security Act".

Subsec. (d)(5)(A)(ii). Pub. L. 106-554, Sec. 1(a)(7) [title I,

Sec. 102(a)], substituted "empowerment zone, enterprise community,

or renewal community" for "empowerment zone or enterprise

community".

Subsec. (d)(5)(B). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.

102(a), (c)], inserted "or community" after "zone" in heading and

substituted "empowerment zone, enterprise community, or renewal

community" for "empowerment zone or enterprise community" in text.

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

Sec. 102(b)], substituted "empowerment zone, enterprise community,

or renewal community" for "empowerment zone or enterprise

community".

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

102(c)], inserted "or community" after "zone" in heading.

1999 - Subsec. (c)(4)(B). Pub. L. 106-170, Sec. 505(a),

substituted "December 31, 2001" for "June 30, 1999".

Subsec. (i)(2). Pub. L. 106-170, Sec. 505(b), struck out "during

which he was not a member of a targeted group" before period at

end.

1998 - Subsec. (c)(4)(B). Pub. L. 105-277, Sec. 1002(a),

substituted "June 30, 1999" for "June 30, 1998".

Subsec. (d)(6)(B)(i). Pub. L. 105-277, Sec. 4006(c)(1),

substituted "plan for employment" for "rehabilitation plan".

1997 - Subsec. (a). Pub. L. 105-34, Sec. 603(d)(1), substituted

"40 percent" for "35 percent".

Subsec. (c)(4)(B). Pub. L. 105-34, Sec. 603(a), substituted "June

30, 1998" for "September 30, 1997".

Subsec. (d)(1)(H). Pub. L. 105-34, Sec. 603(c)(1), added subpar.

(H).

Subsec. (d)(2)(A). Pub. L. 105-34, Sec. 603(b)(1), substituted

"for any 9 months during the 18-month period ending on the hiring

date" for "for at least a 9-month period ending during the 9-month

period ending on the hiring date".

Subsec. (d)(3)(A). Pub. L. 105-34, Sec. 603(b)(2), amended

heading and text of subpar. (A) generally. Prior to amendment, text

read as follows: "The term 'qualified veteran' means any veteran

who is certified by the designated local agency as being -

"(i) a member of a family receiving assistance under a IV-A

program (as defined in paragraph (2)(B)) for at least a 9-month

period ending during the 12-month period ending on the hiring

date, or

"(ii) a member of a family receiving assistance under a food

stamp program under the Food Stamp Act of 1977 for at least a

3-month period ending during the 12-month period ending on the

hiring date."

Subsec. (d)(9). Pub. L. 105-34, Sec. 603(c)(2), added par. (9).

Former par. (9) redesignated (10).

Pub. L. 105-33 repealed Pub. L. 104-193, Sec. 110(l)(1). See 1996

Amendment note below.

Subsec. (d)(10) to (12). Pub. L. 105-34, Sec. 603(c)(2),

redesignated pars. (9) to (11) as (10) to (12), respectively.

Subsec. (i)(3). Pub. L. 105-34, Sec. 603(d)(2), amended heading

and text of par. (3) generally. Prior to amendment, text read as

follows: "No wages shall be taken into account under subsection (a)

with respect to any individual unless such individual either -

"(A) is employed by the employer at least 180 days (20 days in

the case of a qualified summer youth employee), or

"(B) has completed at least 400 hours (120 hours in the case of

a qualified summer youth employee) of services performed for the

employer."

1996 - Subsec. (a). Pub. L. 104-188, Sec. 1201(a), (e)(1),

substituted "work opportunity credit" for "targeted jobs credit"

and "35 percent" for "40 percent".

Subsec. (c)(1). Pub. L. 104-188, Sec. 1201(f), struck out ",

subsection (d)(8)(D)," after "this subsection".

Subsec. (c)(4). Pub. L. 104-188, Sec. 1201(d), amended par. (4)

generally. Prior to amendment, par. (4) read as follows:

"Termination. - The term 'wages' shall not include any amount paid

or incurred to an individual who begins work for the employer after

December 31, 1994."

Subsec. (d). Pub. L. 104-188, Sec. 1201(b), reenacted heading

without change and amended text generally, revising and restating

as pars. (1) to (11) provisions formerly contained in pars. (1) to

(16).

Subsec. (d)(9). Pub. L. 104-193, Sec. 110(l)(1), which directed

amendment of par. (9) by striking all that follows "agency as" and

inserting "being eligible for financial assistance under part A of

title IV of the Social Security Act and as having continually

received such financial assistance during the 90-day period which

immediately precedes the date on which such individual is hired by

the employer.", was repealed by Pub. L. 105-33.

Subsec. (g). Pub. L. 104-188, Sec. 1201(e)(1), substituted "work

opportunity credit" for "targeted jobs credit".

Subsec. (i)(3). Pub. L. 104-188, Sec. 1201(c), amended par. (3)

generally. Prior to amendment, par. (3) read as follows:

"Individuals not meeting minimum employment period. - No wages

shall be taken into account under subsection (a) with respect to

any individual unless such individual either -

"(A) is employed by the employer at least 90 days (14 days in

the case of an individual described in subsection (d)(12)), or

"(B) has completed at least 120 hours (20 hours in the case of

an individual described in subsection (d)(12)) of services

performed for the employer."

Subsec. (j). Pub. L. 104-188, Sec. 1201(e)(5), substituted "Work

opportunity credit" for "Targeted jobs credit" in heading.

1993 - Subsec. (c)(4). Pub. L. 103-66, Sec. 13102(a), substituted

"December 31, 1994" for "June 30, 1992".

Subsec. (i)(1)(A). Pub. L. 103-66, Sec. 13302(d), inserted ", or,

if the taxpayer is an entity other than a corporation, to any

individual who owns, directly or indirectly, more than 50 percent

of the capital and profits interests in the entity," after "of the

corporation".

1991 - Subsec. (c)(4). Pub. L. 102-227 substituted "June 30,

1992" for "December 31, 1991".

1990 - Subsec. (c)(4). Pub. L. 101-508 substituted "December 31,

1991" for "September 30, 1990".

1989 - Subsec. (c)(4). Pub. L. 101-239, Sec. 7103(a), substituted

"September 30, 1990" for "December 31, 1989".

Subsec. (d)(16)(C). Pub. L. 101-239, Sec. 7103(c)(1), added

subpar. (C).

1988 - Subsec. (c)(2)(B). Pub. L. 100-485 substituted "section

482(e)" for "section 414".

Subsec. (c)(4). Pub. L. 100-647, Sec. 4010(a), substituted "1989"

for "1988".

Subsec. (d)(3)(B). Pub. L. 100-647, Sec. 4010(c)(1), substituted

"age 23" for "age 25".

Subsec. (d)(12)(B). Pub. L. 100-647, Sec. 4010(d)(1),

redesignated former cls. (ii) and (iii) as (i) and (ii),

respectively, and struck out former cl. (i) which provided that

subsection (a) shall be applied by substituting "85 percent" for

"40 percent".

Pub. L. 100-647, Sec. 1017(a), substituted "subsection (a)" for

"subsection (a)(1)" in cl. (i).

1987 - Subsec. (c)(3), (4). Pub. L. 100-203 added par. (3) and

redesignated former par. (3) as (4).

1986 - Subsec. (a). Pub. L. 99-514, Sec. 1701(b)(1), amended

subsec. (a) generally. Prior to amendment, subsec. (a) read as

follows: "For purposes of section 38, the amount of the targeted

jobs credit determined under this section for the taxable year

shall be the sum of -

"(1) 50 percent of the qualified first-year wages for such

year, and

"(2) 25 percent of the qualified second-year wages for such

year."

Subsec. (b)(3), (4). Pub. L. 99-514, Sec. 1701(b)(2)(A),

redesignated par. (4) as (3) and struck out ", and the amount of

the qualified second-year wages," after "first-year wages" and

struck out par. (3) which defined "qualified second-year wages".

Subsec. (c)(3). Pub. L. 99-514, Sec. 1701(a), substituted

"December 31, 1988" for "December 31, 1985".

Subsec. (d)(12)(B). Pub. L. 99-514, Sec. 1701(b)(2)(B), in cl.

(i), substituted "40 percent" for "50 percent", struck out cl. (ii)

which directed that subsecs. (a)(2) and (b)(3) were not to apply,

redesignated cl. (iii) as cl. (ii), redesignated cl. (iv) as cl.

(iii), and in cl. (iii) as so redesignated substituted "subsection

(b)(3)" for "subsection (b)(4)".

Subsec. (i)(3). Pub. L. 99-514, Sec. 1701(c), added par. (3).

Subsec. (k). Pub. L. 99-514, Sec. 1878(f)(1), redesignated

subsec. (j) added by section 1041(c)(1) of Pub. L. 98-369 and

relating to treatment of successor employers, and employees

performing services for other persons, as subsec. (k).

1984 - Subsec. (a). Pub. L. 98-369, Sec. 474(p)(1), substituted

"For purposes of section 38, the amount of the targeted jobs credit

determined under this section" for "The amount of the credit

allowable by section 44B" in introductory provisions.

Subsec. (b)(2). Pub. L. 98-369, Sec. 1041(c)(4), struck out "(or,

in the case of a vocational rehabilitation referral, the day the

individual begins work for the employer on or after the beginning

of such individual's rehabilitation plan)" after "begins work for

the employer".

Subsec. (c)(2). Pub. L. 98-369, Sec. 2638(b), designated existing

provisions as subpar. (A), inserted par. (2) heading, and added

subpar. (B).

Subsec. (c)(3). Pub. L. 98-369, Sec. 1041(a), substituted

"December 31, 1985" for "December 31, 1984".

Subsec. (d)(6)(B)(ii). Pub. L. 98-369, Sec. 2663(j)(5)(A),

substituted "Secretary of Health and Human Services" for "Secretary

of Health Education and Welfare".

Subsec. (d)(11). Pub. L. 98-369, Sec. 712(n), made determination

respecting membership of a qualified summer youth employee or youth

participating in a qualified cooperative education program with

respect to an employer applicable for purposes of determining

whether such individual is a member of another targeted group with

respect to such employer.

Subsec. (d)(12)(A)(ii). Pub. L. 98-369, Sec. 1041(c)(3),

substituted "(or if later, on May 1 of the calendar year involved)"

for "(as defined in paragraph (14))".

Subsec. (d)(16)(A). Pub. L. 98-369, Sec. 1041(c)(2), inserted

"For purposes of the preceding sentence, if on or before the day on

which such individual begins work for the employer, such individual

has received from a designated local agency (or other agency or

organization designated pursuant to a written agreement with such

designated local agency) a written preliminary determination that

such individual is a member of a targeted group, then 'the fifth

day' shall be substituted for 'the day' in such sentence."

Subsec. (g). Pub. L. 98-369, Sec. 474(p)(2), substituted "the

targeted jobs credit determined under this subpart" for "the credit

provided by section 44B".

Subsec. (j). Pub. L. 98-369, Sec. 1041(c)(1), added subsec. (j)

relating to treatment of successor employers, and employees

performing services for other persons.

Pub. L. 98-369, Sec. 474(p)(3), added subsec. (j) relating to

election to have targeted jobs credit not apply.

1983 - Subsec. (d)(8)(D). Pub. L. 97-448, Sec. 102(l)(1),

substituted "clauses (i), (ii), and (iii) of subparagraph (A)" for

"subparagraph (A)".

Subsec. (d)(9)(B). Pub. L. 97-448, Sec. 102(l)(3), substituted

"section 432(b)(1) or 445" for "section 432(b)(1)".

Subsec. (d)(11). Pub. L. 97-448, Sec. 102(l)(4), substituted "the

earlier of the month in which such determination occurs or the

month in which the hiring date occurs" for "the month in which such

determination occurs".

1982 - Subsec. (c)(3). Pub. L. 97-248, Sec. 233(a), substituted

"1984" for "1982".

Subsec. (d)(1)(J). Pub. L. 97-248, Sec. 233(b)(3), added subpar.

(J).

Subsec. (d)(6)(B)(i)(II). Pub. L. 97-248, Sec. 233(d),

substituted "consists of money payments or voucher or scrip, and"

for "consists of money payments".

Subsec. (d)(10). Pub. L. 97-248, Sec. 233(c), inserted provision

respecting nonapplicability of paragraph to individuals who begin

work for the employer after December 31, 1982.

Subsec. (d)(12) to (15). Pub. L. 97-248, Sec. 233(b)(4), (5),

added par. (12) and redesignated former pars. (12) to (15) as (13)

to (16), respectively.

Subsec. (d)(16). Pub. L. 97-248, Sec. 233(b)(4), redesignated

former par. (15) as (16).

Pub. L. 97-248, Sec. 233(f), substituted "on or before" for

"before" in subpar. (A).

1981 - Subsec. (c)(3), (4). Pub. L. 97-34, Sec. 261(b)(2)(B)(ii),

redesignated par. (4) as (3). Former par. (3), which excluded from

term "wages" any amount paid or incurred by the employer to an

individual with respect to whom the employer claims credit under

section 40 of this title, was struck out.

Pub. L. 97-34, Sec. 261(a), extended termination date to Dec. 31,

1982, from Dec. 31, 1981, and inserted "to an individual who begins

work for the employer" after "paid or incurred".

Subsec. (d)(1)(H), (I). Pub. L. 97-34, Sec. 261(b)(1), added

subpars. (H) and (I).

Subsec. (d)(3)(A)(ii). Pub. L. 97-34, Sec. 261(b)(2)(B)(iii),

substituted "paragraph (11)" for "paragraph (9)".

Subsec. (d)(4). Pub. L. 97-34, Sec. 261(b)(2)(B)(iii), (3), in

subpar. (B) inserted "and" after "States," in subpar. (C)

substituted "paragraph (11)" for "paragraph (9)", and struck out

"(D) not having attained the age of 35 on the hiring date."

Subsec. (d)(7)(B). Pub. L. 97-34, Sec. 261(b)(2)(B)(iii),

substituted "paragraph (11)" for "paragraph (9)".

Subsec. (d)(8)(A)(iv). Pub L. 97-34, Sec. 261(b)(4), added cl.

(iv).

Subsec. (d)(9), (10). Pub. L. 97-34, Sec. 261(b)(2)(A), added

pars. (9) and (10) and redesignated former pars. (9) and (10) as

(11) and (12), respectively.

Subsec. (d)(11). Pub. L. 97-34, Sec. 261(b)(2)(A), (c)(2),

redesignated former par. (9) as (11), substituted "70 percent or

less" for "less than 70 percent", and provided for validity of any

determination for 45-day period beginning on the date the

determination is made. Former par. (11) redesignated (13).

Subsec. (d)(12), (13). Pub. L. 97-34, Sec. 261(b)(2)(A),

redesignated former pars. (10) and (11) as pars. (12) and (13),

respectively. Former par. (12) redesignated (14).

Subsec. (d)(14). Pub. L. 97-34, Sec. 261(f)(1)(A), substituted as

definition for term " 'designated local agency' means a State

employment security agency established in accordance with the Act

of June 6, 1933, as amended (29 U.S.C. 49-49n)" for " 'designated

local agency' means the agency for any locality designated jointly

by the Secretary and the Secretary of Labor to perform

certification of employees for employers in that locality".

Pub. L. 97-34, Sec. 261(b)(2)(A), redesignated former par. (12)

as (14).

Subsec. (d)(15). Pub. L. 97-34, Sec. 261(c)(1), added par. (15).

Subsec. (e). Pub. L. 97-34, Sec. 261(e)(1), struck out subsec.

(e) which set forth limitation that qualified first-year wages

could not exceed 30 percent of FUTA wages for all employees.

Subsec. (f). Pub. L. 97-34, Sec. 261(e)(2), substituted "any

taxable year" for "any year" in pars. (1) and (2) and struck out

par. (3), defining "year" which is covered in pars. (1) and (2).

Subsec. (g). Pub. L. 97-34, Sec. 261(f)(1)(B), substituted

"United States Employment Service" for "Secretary of Labor" in

heading and text.

Subsec. (i). Pub. L. 97-34, Sec. 261(d), added subsec. (i).

1980 - Subsec. (c)(1). Pub. L. 96-222, Sec. 103(a)(6)(E)(ii),

substituted ", subsection (d)(8)(D), and subsection (h)(2)" for

"subsection (h)(2)".

Subsec. (c)(2). Pub. L. 96-222, Sec. 103(a)(6)(G)(iii), inserted

"or incurred" after "amounts paid".

Subsec. (c)(4). Pub. L. 96-222, Sec. 103(a)(6)(A), substituted

"December 31, 1981" for "December 31, 1980".

Subsec. (d)(1)(E). Pub. L. 96-222, Sec. 103(a)(6)(G)(iv), struck

out "or" after "recipient,".

Subsec. (d)(4)(A)(i). Pub. L. 96-222, Sec. 103(a)(6)(G)(v),

substituted "active duty" for "active day".

Subsec. (d)(4)(B). Pub. L. 96-222, Sec. 103(a)(6)(G)(vi),

substituted "preemployment" for "premployment".

Subsec. (d)(5). Pub. L. 96-222, Sec. 103(a)(6)(G)(vii),

substituted "preemployment" for "pre-employment".

Subsec. (d)(8)(A). Pub. L. 96-222, Sec. 103(a)(6)(F), substituted

"age 20" for "age 19".

Subsec. (d)(8)(D). Pub. L. 96-222, Sec. 103(a)(6)(E)(i), in

heading substituted "Wages" for "Individual must be currently

pursuing program" and in text substituted "In the case of

remuneration" for "Wages shall be taken into account with respect

to a qualified cooperative education program only if the wages are"

and inserted ", wages, and unemployment insurance wages, shall be

determined without regard to section 3306(c)(10)(C)".

Subsec. (d)(12). Pub. L. 96-222, Sec. 103(a)(6)(G)(viii),

substituted "employers" for "employer".

Subsec. (e). Pub. L. 96-222, Sec. 103(a)(6)(G)(ix), inserted

"except as provided in subsection (h)(1)" after "the preceding

sentence,".

1978 - Pub. L. 95-600 amended section generally and limited

allowance of credit to the hiring of seven target groups with high

unemployment rates.

EFFECTIVE DATE OF 2002 AMENDMENT

Pub. L. 107-147, title VI, Sec. 604(b), Mar. 9, 2002, 116 Stat.

59, provided that: "The amendment made by subsection (a) [amending

this section] shall apply to individuals who begin work for the

employer after December 31, 2001."

EFFECTIVE DATE OF 2000 AMENDMENT

Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 102(d)], Dec. 21,

2000, 114 Stat. 2763, 2763A-600, provided that: "The amendments

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

individuals who begin work for the employer after December 31,

2001."

Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 316(e)], Dec. 21,

2000, 114 Stat. 2763, 2763A-645, provided that: "The amendments

made by this section [amending this section and sections 219, 401

and 1361 of this title] shall take effect as if included in the

provisions of the Small Business Job Protection Act of 1996 [Pub.

L. 104-188] to which they relate."

EFFECTIVE DATE OF 1999 AMENDMENT

Pub. L. 106-170, title V, Sec. 505(c), Dec. 17, 1999, 113 Stat.

1921, provided that: "The amendments made by this section [amending

this section and section 51A of this title] shall apply to

individuals who begin work for the employer after June 30, 1999."

EFFECTIVE DATE OF 1998 AMENDMENT

Pub. L. 105-277, div. J, title I, Sec. 1002(b), Oct. 21, 1998,

112 Stat. 2681-888, provided that: "The amendment made by this

section [amending this section] shall apply to individuals who

begin work for the employer after June 30, 1998."

EFFECTIVE DATE OF 1997 AMENDMENTS

Section 603(e) of Pub. L. 105-34 provided that: "The amendments

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

individuals who begin work for the employer after September 30,

1997."

Section 5518(c) of Pub. L. 105-33 provided that: "The amendments

made by section 5514(a) of this Act [amending this section and

sections 3304, 6103, 6334, 6402, and 7523 of this title] shall take

effect as if the amendments had been included in section 110 of the

Personal Responsibility and Work Opportunity Reconciliation Act of

1996 [Pub. L. 104-193] at the time such section 110 became law."

EFFECTIVE DATE OF 1996 AMENDMENTS

Amendment by Pub. L. 104-193 effective July 1, 1997, with

transition rules relating to State options to accelerate such date,

rules relating to claims, actions, and proceedings commenced before

such date, rules relating to closing out of accounts for terminated

or substantially modified programs and continuance in office of

Assistant Secretary for Family Support, and provisions relating to

termination of entitlement under AFDC program, see section 116 of

Pub. L. 104-193, as amended, set out as an Effective Date note

under section 601 of Title 42, The Public Health and Welfare.

Amendment by Pub. L. 104-188 applicable to individuals who begin

work for the employer after Sept. 30, 1996, see section 1201(g) of

Pub. L. 104-188, set out as a note under section 38 of this title.

EFFECTIVE DATE OF 1993 AMENDMENT

Section 13102(b) of Pub. L. 103-66 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

individuals who begin work for the employer after June 30, 1992."

EFFECTIVE DATE OF 1991 AMENDMENT

Section 105(b) of Pub. L. 102-227 provided that: "The amendment

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

individuals who begin work for the employer after December 31,

1991."

EFFECTIVE DATE OF 1990 AMENDMENT

Section 11405(c) of Pub. L. 101-508 provided that:

"(1) Credit. - The amendment made by subsection (a) [amending

this section] shall apply to individuals who begin work for the

employer after September 30, 1990.

"(2) Authorization. - The amendment made by subsection (b)

[amending provisions set out below] shall apply to fiscal years

beginning after 1990."

EFFECTIVE DATE OF 1989 AMENDMENT

Section 7103(c)(2) of Pub. L. 101-239 provided that: "The

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

to individuals who begin work for the employer after December 31,

1989."

EFFECTIVE DATE OF 1988 AMENDMENTS

Amendment by section 1017(a) 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.

Section 4010(c)(2) of Pub. L. 100-647 provided that: "The

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

to individuals who begin work for the employer after December 31,

1988."

Section 4010(d)(2) of Pub. L. 100-647 provided that: "The

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

to individuals who begin work for the employer after December 31,

1988."

Amendment by Pub. L. 100-485 effective Oct. 1, 1990, with

provision for earlier effective dates in case of States making

certain changes in their State plans and formally notifying the

Secretary of Health and Human Services of their desire to become

subject to the amendments made by title II of Pub. L. 100-485 on

the earlier effective dates, see section 204 of Pub. L. 100-485,

set out as a note under section 671 of Title 42, The Public Health

and Welfare.

EFFECTIVE DATE OF 1987 AMENDMENT

Section 10601(b) of Pub. L. 100-203 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

amounts paid or incurred on or after January 1, 1987, for services

rendered on or after such date."

EFFECTIVE DATE OF 1986 AMENDMENT

Section 1701(e) of Pub. L. 99-514 provided that: "The amendments

made by this section [amending this section and provisions set out

below] shall apply with respect to individuals who begin work for

the employer after December 31, 1985."

Amendment by section 1878(f)(1) of Pub. L. 99-514 effective,

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

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

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

note under section 48 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by section 474(p)(1)-(3) of Pub. L. 98-369 applicable

to taxable years beginning after Dec. 31, 1983, and to carrybacks

from such years, see section 475(a) of Pub. L. 98-369, set out as a

note under section 21 of this title.

Amendment by section 712 of Pub. L. 98-369 effective as if

included in the provision of the Tax Equity and Fiscal

Responsibility Act of 1982, Pub. L. 97-248, to which such amendment

relates, see section 715 of Pub. L. 98-369, set out as a note under

section 31 of this title.

Section 1041(c)(5) of Pub. L. 98-369, as amended by Pub. L.

99-514, Sec. 2, title XVIII, Sec. 1878(f)(2), Oct. 22, 1986, 100

Stat. 2095, 2904, provided that:

"(A) In general. - Except as provided in subparagraph (B), the

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

to individuals who begin work for the employer after the date of

the enactment of this Act [July 18, 1984].

"(B) Special rule for employees performing services for other

persons. - Paragraph (2) of section 51(k) of the Internal Revenue

Code of 1986 [formerly I.R.C. 1954] (as added by this subsection)

and the amendment made by paragraph (3) of this subsection

[amending this section] shall apply to individuals who begin work

for the employer after December 31, 1984."

Section 2638(c)(2) of Pub. L. 98-369 provided that: "The

amendments made by subsection (b) [amending this section] shall

apply with respect to payments made on or after the date of the

enactment of this Act [July 18, 1984]."

Amendment by section 2663 of Pub. L. 98-369 effective July 18,

1984, but not to be construed as changing or affecting any right,

liability, status or interpretation which existed (under the

provisions of law involved) before that date, see section 2664(b)

of Pub. L. 98-369, set out as a note under section 401 of Title 42,

The Public Health and Welfare.

EFFECTIVE DATE OF 1983 AMENDMENT

Section 102(l)(4) of Pub. L. 97-448 provided that the amendment

made by that section is effective with respect to certifications

made after Jan. 12, 1983, with respect to individuals beginning

work for an employer after May 11, 1982.

Amendment by title I of Pub. L. 97-448 effective, except as

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

the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such

amendment relates, see section 109 of Pub. L. 97-448, set out as a

note under section 1 of this title.

EFFECTIVE DATE OF 1982 AMENDMENT

Section 233(f) of Pub. L. 97-248 provided that the amendments

made by that section are effective only with respect to individuals

who begin work for the taxpayer after May 11, 1982.

Section 233(g) of Pub. L. 97-248 provided that:

"(1) Subsection (b). - The amendments made by subsection (b)

[amending this section] shall apply to amounts paid or incurred

after April 30, 1983, to individuals beginning work for the

employer after such date.

"(2) Subsection (d). - The amendments made by subsection (d)

[amending this section] shall apply to amounts paid or incurred

after July 1, 1982, to individuals beginning work for the employer

after such date."

EFFECTIVE DATE OF 1981 AMENDMENT

Section 261(g) of Pub. L. 97-34, as amended by Pub. L. 97-448,

title I, Sec. 102(l)(2), Jan. 12, 1983, 96 Stat. 2374; Pub. L.

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

"(1) Amendments relating to members of targeted groups. -

"(A) In general. - Except as provided in subparagraphs (B),

(C), and (D), the amendments made by subsections (b), (c)(2), and

(d) [amending this section and section 50B of this title] shall

apply to wages paid or incurred with respect to individuals first

beginning work for an employer after the date of the enactment of

this Act [Aug. 13, 1981] in taxable years ending after such date.

"(B) Eligible work incentive employees. - The amendments made

by subsection (b)(2) [amending this section] to the extent

relating to the designation of eligible work incentive employees

(within the meaning of section 51(d)(9) [now 51(d)(10)] of the

Internal Revenue Code of 1986 [formerly I.R.C. 1954]) as members

of a targeted group and subsection (b)(2)(B)(ii) [amending this

section] shall apply to taxable years beginning after December

31, 1981. In the case of an eligible work incentive employee,

subsections (a) and (b) of section 51 of such Code shall be

applied for taxable years beginning after December 31, 1981, as

if such employees had been members of a targeted group for

taxable years beginning before January 1, 1982.

"(C) Cooperative education program participants. - The

amendments made by subsection (b)(4) [amending this section]

shall apply to wages paid or incurred after December 31, 1981, in

taxable years ending after such date.

"(D) Designated local agency. - The amendments made by

subsection (f)(1) [amending this section] shall take effect on

the date 60 days after the date of the enactment of this act

[Aug. 13, 1981].

"(2) Certifications. -

"(A) In general. - The amendment made by subsection (c)(1)

[amending this section] shall apply to all individuals whether

such individuals began work for their employer before, on, or

after the date of the enactment of this Act [Aug. 13, 1981].

"(B) Special rule for individuals who began work for the

employer before 45th day before date of enactment. - In the case

of any individual (other than an individual described in section

51(d)(8) of the Internal Revenue Code of 1986) who began work for

the employer before the date 45 days before the date of the

enactment of this Act [Aug. 13, 1981], paragraph (15) of section

51(d) of the Internal Revenue Code of 1986 (as added by

subsection (c)(1)) shall be applied by substituting "July 23,

1981," for the day on which such individual begins work for the

employer.

"(C) Individuals who begin work for employer within 45 days

before or after date of enactment. - In the case of any

individual (other than an individual described in section

51(d)(8) of the Internal Revenue Code of 1986) who begins work

for the employer during the 90-day period beginning with the date

45 days before the date of the enactment of this Act [Aug. 13,

1981], and in the case of an individual described in section

51(d)(8) of such Code who begins work before the end of such

90-day period, paragraph (15) of section 51(d) of such Code (as

added by subsection (c)(1)) shall be applied by substituting "the

last day of the 90-day period beginning with the date 45 days

before the date of the enactment of this Act" for the day on

which such individual begins work for the employer.

"(3) Limitation on qualified first-year wages. - The amendment

made by subsection (e) [amending this section] shall apply to

taxable years beginning after December 31, 1981."

EFFECTIVE DATE OF 1980 AMENDMENT

Section 103(b)(1) of Pub. L. 96-222 provided that: "The amendment

made by subsection (a)(5)(F) [probably means subsec. (a)(6)(F),

amending this section] shall apply to wages paid or incurred on or

after November 27, 1979, in taxable years ending on or after such

date."

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

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

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

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

section 32 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Section 321(d)(1) of Pub. L. 95-600 provided that: "Except as

otherwise provided in this subsection, the amendments made by this

section [amending this section and sections 44B, 52, 53, and 6501

of this title] shall apply to amounts paid or incurred after

December 31, 1978, in taxable years ending after such date."

EFFECTIVE DATE

Section 202(e) of Pub. L. 95-30 provided that: "The amendments

made by this section [enacting this section and sections 44B, 52,

53, and 280C of this title and amending sections 56, 381, 383,

6096, 6411, 6501, 6511, 6601, and 6611 of this title] shall apply

to taxable years beginning after December 31, 1976, and to credit

carrybacks from such years."

REFERENCE TO PLAN FOR EMPLOYMENT

Pub. L. 105-277, div. J, title IV, Sec. 4006(c)(1), Oct. 21,

1998, 112 Stat. 2681-912, provided that: "The reference to 'plan

for employment' in such clause [26 U.S.C. 51(d)(6)(B)(i)] shall be

treated as including a reference to the rehabilitation plan

referred to in such clause as in effect before the amendment made

by the preceding sentence."

AUTHORIZATION OF APPROPRIATIONS

Section 261(f)(2) of Pub. L. 97-34, as amended by Pub. L. 97-248,

title II, Sec. 233(e), Sept. 3, 1982, 96 Stat. 502; Pub. L. 98-369,

div. A, title X, Sec. 1041(b), July 18, 1984, 98 Stat. 1042; Pub.

L. 99-514, title XVII, Sec. 1701(d), Oct. 22, 1986, 100 Stat. 2772;

Pub. L. 100-647, title IV, Sec. 4010(b), Nov. 10, 1988, 102 Stat.

3655; Pub. L. 101-239, title VII, Sec. 7103(b), Dec. 19, 1989, 103

Stat. 2305; Pub. L. 101-508, title XI, Sec. 11405(b), Nov. 5, 1990,

104 Stat. 1388-473, provided that: "There is authorized to be

appropriated for each fiscal year such sums as may be necessary, to

carry out the functions described by the amendments made by

paragraph (1) [amending this section], except that, of the amounts

appropriated pursuant to this paragraph -

"(A) $5,000,000 shall be used to test whether individuals

certified as members of targeted groups under section 51 of such

Code are eligible for such certification (including the use of

statistical sampling techniques), and

"(B) the remainder shall be distributed under performance

standards prescribed by the Secretary of Labor.

The Secretary of Labor shall each calendar year beginning with

calendar year 1983 report to the Committee on Ways and Means of the

House of Representatives and to the Committee on Finance of the

Senate with respect to the results of the testing conducted under

subparagraph (A) during the preceding calendar year."

[For termination, effective May 15, 2000, of reporting provisions

in section 261(f)(2) of Pub. L. 97-34, set out above, see section

3003 of Pub. L. 104-66, as amended, set out as a note under section

1113 of Title 31, Money and Finance, and page 124 of House Document

No. 103-7.]

[Amendment by Pub. L. 101-508 applicable to fiscal years

beginning after 1990, see section 11405(c)(2) of Pub. L. 101-508,

set out as an Effective Date of 1990 Amendment note above.]

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.

SPECIAL RULES FOR NEWLY TARGETED GROUPS

Section 321(d)(2) of Pub. L. 95-600, as amended by Pub. L.

96-222, title I, Sec. 103(a)(6)(C), (G)(xi), Apr. 1, 1980, 94 Stat.

209, 211; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,

provided that:

"(A) Individual must be hired after september 26, 1978. - In the

case of a member of a newly targeted group, for purposes of

applying the amendments made by this section -

"(i) such individual shall be taken into account for purposes

of the credit allowable by section 44B of the Internal Revenue

Code of 1986 [formerly I.R.C. 1954] only if such individual is

first hired by the employer after September 26, 1978, and

"(ii) such individual shall be treated for purposes of such

credit as having first begun work for the employer not earlier

than January 1, 1979.

"(B) Member of newly targeted group defined. - For purposes of

subparagraph (A), an individual is a member of a newly targeted

group if -

"(i) such individual meets the requirements of paragraph (1) of

section 51(d) of such Code, and

"(ii) in the case of an individual meeting the requirements of

subparagraph (A) of such paragraph (1), a credit was not claimed

for such individual by the taxpayer for a taxable year beginning

before January 1, 1979."

CREDIT ALLOWABLE BY SECTION 44B IN CASE OF TAXABLE YEAR BEGINNING

IN 1978 AND ENDING AFTER DECEMBER 31, 1978

Section 321(d)(3) of Pub. L. 95-600, as amended by Pub. L.

96-222, title I, Sec. 103(a)(6)(D), Apr. 1, 1980, 94 Stat. 209;

Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided

that: "In the case of a taxable year which begins in 1978 and ends

after December 31, 1978, the amount of the credit determined under

section 51 of the Internal Revenue Code of 1986 [formerly I.R.C.

1954] shall be the sum of -

"(A) the amount of the credit which would be so determined

without regard to the amendments made by this section, plus

"(B) the amount of the credit which would be so determined by

reason of the amendments made by this section."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 38, 41, 45A, 51A, 52,

196, 280C, 936, 1396, 1397, 1400L, 6501 of this title; title 42

section 13725.

-FOOTNOTE-

(!1) See References in Text note below.

(!2) So in original. The comma probably should not appear.

-End-

-CITE-

26 USC Sec. 51A 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart F - Rules for Computing Work Opportunity Credit

-HEAD-

Sec. 51A. Temporary incentives for employing long-term family

assistance recipients

-STATUTE-

(a) Determination of amount

For purposes of section 38, the amount of the welfare-to-work

credit determined under this section for the taxable year shall be

equal to -

(1) 35 percent of the qualified first-year wages for such year,

and

(2) 50 percent of the qualified second-year wages for such

year.

(b) Qualified wages defined

For purposes of this section -

(1) In general

The term "qualified wages" means the wages paid or incurred by

the employer during the taxable year to individuals who are

long-term family assistance recipients.

(2) Qualified first-year wages

The term "qualified first-year wages" means, with respect to

any individual, qualified wages attributable to service rendered

during the 1-year period beginning with the day the individual

begins work for the employer.

(3) Qualified second-year wages

The term "qualified second-year wages" means, with respect to

any individual, qualified wages attributable to service rendered

during the 1-year period beginning on the day after the last day

of the 1-year period with respect to such individual determined

under paragraph (2).

(4) Only first $10,000 of wages per year taken into account

The amount of the qualified first-year wages, and the amount of

qualified second-year wages, which may be taken into account with

respect to any individual shall not exceed $10,000 per year.

(5) Wages

(A) In general

The term "wages" has the meaning given such term by section

51(c), without regard to paragraph (4) thereof.

(B) Certain amounts treated as wages

The term "wages" includes amounts paid or incurred by the

employer which are excludable from such recipient's gross

income under -

(i) section 105 (relating to amounts received under

accident and health plans),

(ii) section 106 (relating to contributions by employer to

accident and health plans),

(iii) section 127 (relating to educational assistance

programs), but only to the extent paid or incurred to a

person not related to the employer, or

(iv) section 129 (relating to dependent care assistance

programs).

The amount treated as wages by clause (i) or (ii) for any

period shall be based on the reasonable cost of coverage for

the period, but shall not exceed the applicable premium for the

period under section 4980B(f)(4).

(C) Special rules for agricultural and railway labor

If such recipient is an employee to whom subparagraph (A) or

(B) of section 51(h)(1) applies, rules similar to the rules of

such subparagraphs shall apply except that -

(i) such subparagraph (A) shall be applied by substituting

"$10,000" for "$6,000", and

(ii) such subparagraph (B) shall be applied by substituting

"$833.33" for "$500".

(c) Long-term family assistance recipients

For purposes of this section -

(1) In general

The term "long-term family assistance recipient" means any

individual who is certified by the designated local agency (as

defined in section 51(d)(11)) -

(A) as being a member of a family receiving assistance under

a IV-A program (as defined in section 51(d)(2)(B)) for at least

the 18-month period ending on the hiring date,

(B)(i) as being a member of a family receiving such

assistance for 18 months beginning after the date of the

enactment of this section, and

(ii) as having a hiring date which is not more than 2 years

after the end of the earliest such 18-month period, or

(C)(i) as being a member of a family which ceased to be

eligible after the date of the enactment of this section for

such assistance by reason of any limitation imposed by Federal

or State law on the maximum period such assistance is payable

to a family, and

(ii) as having a hiring date which is not more than 2 years

after the date of such cessation.

(2) Hiring date

The term "hiring date" has the meaning given such term by

section 51(d).

(d) Certain rules to apply

(1) In general

Rules similar to the rules of section 52, and subsections

(d)(11), (f), (g), (i) (as in effect on the day before the date

of the enactment of the Taxpayer Relief Act of 1997), (j), and

(k) of section 51, shall apply for purposes of this section.

(2) Credit to be part of general business credit, etc.

References to section 51 in section 38(b), 280C(a), and

1396(c)(3) shall be treated as including references to this

section.

(e) Coordination with work opportunity credit

If a credit is allowed under this section to an employer with

respect to an individual for any taxable year, then for purposes of

applying section 51 to such employer, such individual shall not be

treated as a member of a targeted group for such taxable year.

(f) Termination

This section shall not apply to individuals who begin work for

the employer after December 31, 2003.

-SOURCE-

(Added Pub. L. 105-34, title VIII, Sec. 801(a), Aug. 5, 1997, 111

Stat. 869; amended Pub. L. 105-277, div. J, title I, Sec. 1003,

Oct. 21, 1998, 112 Stat. 2681-888; Pub. L. 106-170, title V, Sec.

505(a), Dec. 17, 1999, 113 Stat. 1921; Pub. L. 107-16, title IV,

Sec. 411(c), June 7, 2001, 115 Stat. 63; Pub. L. 107-147, title IV,

Sec. 417(4), title VI, Sec. 605(a), Mar. 9, 2002, 116 Stat. 56,

60.)

-STATAMEND-

AMENDMENT OF SECTION

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

see Effective and Termination Dates of 2001 Amendment note below.

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of this section, referred to in subsec.

(c)(1)(B)(i), (C)(i), is the date of enactment of Pub. L. 105-34,

which was approved Aug. 5, 1997.

The date of the enactment of the Taxpayer Relief Act of 1997,

referred to in subsec. (d)(1), is the date of enactment of Pub. L.

105-34, which was approved Aug. 5, 1997.

-MISC1-

AMENDMENTS

2002 - Subsec. (c)(1). Pub. L. 107-147, Sec. 417(4), substituted

"51(d)(11)" for "51(d)(10)" in introductory provisions.

Subsec. (f). Pub. L. 107-147, Sec. 605(a), substituted "2003" for

"2001".

2001 - Subsec. (b)(5)(B)(iii). Pub. L. 107-16, Secs. 411(c), 901,

temporarily struck out "or would be so excludable but for section

127(d)" before ", but only". See Effective and Termination Dates of

2001 Amendment note below.

1999 - Subsec. (f). Pub. L. 106-170 substituted "December 31,

2001" for "June 30, 1999".

1998 - Subsec. (f). Pub. L. 105-277 substituted "June 30, 1999"

for "April 30, 1999".

EFFECTIVE DATE OF 2002 AMENDMENT

Pub. L. 107-147, title VI, Sec. 605(b), Mar. 9, 2002, 116 Stat.

60, provided that: "The amendment made by subsection (a) [amending

this section] shall apply to individuals who begin work for the

employer after December 31, 2001."

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT

Pub. L. 107-16, title IV, Sec. 411(d), June 7, 2001, 115 Stat.

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

this section and section 127 of this title] shall apply with

respect to expenses relating to courses beginning after December

31, 2001."

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

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

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

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

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

EFFECTIVE DATE OF 1999 AMENDMENT

Amendment by Pub. L. 106-170 applicable to individuals who begin

work for the employer after June 30, 1999, see section 505(c) of

Pub. L. 106-170, set out as a note under section 51 of this title.

EFFECTIVE DATE

Section 801(c) of Pub. L. 105-34 provided that: "The amendments

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

individuals who begin work for the employer after December 31,

1997."

-End-

-CITE-

26 USC Sec. 52 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart F - Rules for Computing Work Opportunity Credit

-HEAD-

Sec. 52. Special rules

-STATUTE-

(a) Controlled group of corporations

For purposes of this subpart, all employees of all corporations

which are members of the same controlled group of corporations

shall be treated as employed by a single employer. In any such

case, the credit (if any) determined under section 51(a) with

respect to each such member shall be its proportionate share of the

wages giving rise to such credit. For purposes of this subsection,

the term "controlled group of corporations" has the meaning given

to such term by section 1563(a), except that -

(1) "more than 50 percent" shall be substituted for "at least

80 percent" each place it appears in section 1563(a)(1), and

(2) the determination shall be made without regard to

subsections (a)(4) and (e)(3)(C) of section 1563.

(b) Employees of partnerships, proprietorships, etc., which are

under common control

For purposes of this subpart, under regulations prescribed by the

Secretary -

(1) all employees of trades or business (whether or not

incorporated) which are under common control shall be treated as

employed by a single employer, and

(2) the credit (if any) determined under section 51(a) with

respect to each trade or business shall be its proportionate

share of the wages giving rise to such credit.

The regulations prescribed under this subsection shall be based on

principles similar to the principles which apply in the case of

subsection (a).

(c) Tax-exempt organizations

No credit shall be allowed under section 38 for any work

opportunity credit determined under this subpart to any

organization (other than a cooperative described in section 521)

which is exempt from income tax under this chapter.

(d) Estates and trusts

In the case of an estate or trust -

(1) the amount of the credit determined under this subpart for

any taxable year shall be apportioned between the estate or trust

and the beneficiaries on the basis of the income of the estate or

trust allocable to each, and

(2) any beneficiary to whom any amount has been apportioned

under paragraph (1) shall be allowed, subject to section 38(c), a

credit under section 38(a) for such amount.

(e) Limitations with respect to certain persons

Under regulations prescribed by the Secretary, in the case of -

(1) a regulated investment company or a real estate investment

trust subject to taxation under subchapter M (section 851 and

following), and

(2) a cooperative organization described in section 1381(a),

rules similar to the rules provided in subsections (e) and (h) of

section 46 (as in effect on the day before the date of the

enactment of the Revenue Reconciliation Act of 1990) shall apply in

determining the amount of the credit under this subpart.

-SOURCE-

(Added Pub. L. 95-30, title II, Sec. 202(b), May 23, 1977, 91 Stat.

143; amended Pub. L. 95-600, title III, Sec. 321(c)(1), Nov. 6,

1978, 92 Stat. 2835; Pub. L. 96-222, title I, Sec. 103(a)(5), Apr.

1, 1980, 94 Stat. 209; Pub. L. 97-354, Sec. 5(a)(11), Oct. 19,

1982, 96 Stat. 1693; Pub. L. 98-369, div. A, title IV, Sec.

474(p)(4)-(7), July 18, 1984, 98 Stat. 838; Pub. L. 101-508, title

XI, Sec. 11813(b)(4), Nov. 5, 1990, 104 Stat. 1388-551; Pub. L.

104-188, title I, Sec. 1616(b)(2), Aug. 20, 1996, 110 Stat. 1856;

Pub. L. 105-34, title XVI, Sec. 1601(b), Aug. 5, 1997, 111 Stat.

1087.)

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of the Revenue Reconciliation Act of

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

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

-MISC1-

AMENDMENTS

1997 - Subsec. (c). Pub. L. 105-34 substituted "work opportunity

credit" for "targeted jobs credit".

1996 - Subsec. (e)(1) to (3). Pub. L. 104-188 redesignated pars.

(2) and (3) as (1) and (2), respectively, and struck out former

par. (1) which read as follows: "an organization to which section

593 (relating to reserves for losses on loans) applies,".

1990 - Subsec. (e). Pub. L. 101-508 substituted "section 46 (as

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

Revenue Reconciliation Act of 1990)" for "section 46" in concluding

provisions.

1984 - Subsec. (a). Pub. L. 98-369, Sec. 474(p)(4), substituted

"the credit (if any) determined under section 51(a) with respect to

each such member" for "the credit (if any) allowable by section 44B

to each such member".

Subsec. (b)(2). Pub. L. 98-369, Sec. 474(p)(5), substituted "the

credit (if any) determined under section 51(a)" for "the credit (if

any) allowable by section 44B".

Subsec. (c). Pub. L. 98-369, Sec. 474(p)(6), substituted "credit

shall be allowed under section 38 for any targeted jobs credit

determined under this subpart" for "credit shall be allowed under

section 44B".

Subsec. (d)(2). Pub. L. 98-369, Sec. 474(p)(7), substituted ",

subject to section 38(c), a credit under section 38(a)" for ",

subject to section 53 a credit under section 44B".

1982 - Subsecs. (d) to (f). Pub. L. 97-354 struck out subsec. (d)

relating to apportionment of credit among shareholders, and

redesignated subsecs. (e) and (f) as (d) and (e), respectively.

1980 - Subsec. (f). Pub. L. 96-222 substituted "subsections (e)

and (h) of section 46" for "section 46(e)".

1978 - Subsecs. (a), (b). Pub. L. 95-600, Sec. 321(c)(1)(B),

substituted "proportionate share of the wages" for "proportionate

contribution to the increase in unemployment insurance wages".

Subsecs. (c), (d). Pub. L. 95-600, Sec. 321(c)(1)(A), struck out

subsec. (c) which related to dispositions by an employer, and

redesignated subsecs. (d) and (f) as (c) and (d), respectively.

Subsec. (e). Pub. L. 95-600, Sec. 321(c)(1)(A), (C), redesignated

subsec. (g) as (e) and struck out par. (3) which provided that the

$100,000 amount specified in section 51(d) applicable to such

estate or trust be reduced to an amount which bears the same ratio

to $100,000 as the portion of the credit allocable to the estate or

trust under paragraph (1) bears to the entire amount of such

credit. Former subsec. (e), which related to a change in status

from self-employed to employee, was struck out.

Subsecs. (f) to (h). Pub. L. 95-600, Sec. 321(c)(1)(A),

redesignated subsecs. (f) to (h) as (d) to (f), respectively.

Subsec. (i). Pub. L. 95-600, Sec. 321(c)(1)(A)(i), struck out

subsec. (i) which related to a $50,000 limitation in the case of

married individuals filing separate returns.

Subsec. (j). Pub. L. 95-600, Sec. 321(c)(1)(A)(i), struck out

subsec. (j) which related to certain short taxable years.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by 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 AMENDMENT

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

beginning after Dec. 31, 1995, see section 1616(c) of Pub. L.

104-188, set out as a note under section 593 of this title.

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by Pub. L. 101-508 applicable to property placed in

service after Dec. 31, 1990, but not applicable to any transition

property (as defined in section 49(e) of this title), any property

with respect to which qualified progress expenditures were

previously taken into account under section 46(d) of this title,

and any property described in section 46(b)(2)(C) of this title, as

such sections were in effect on Nov. 4, 1990, see section 11813(c)

of Pub. L. 101-508, set out as a note under section 29 of this

title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-369 applicable to taxable years beginning

after Dec. 31, 1983, and to carrybacks from such years, see section

475(a) of Pub. L. 98-369, set out as a note under section 21 of

this title.

EFFECTIVE DATE OF 1982 AMENDMENT

Amendment by Pub. L. 97-354 applicable to taxable years beginning

after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as

an Effective Date note under section 1361 of this title.

EFFECTIVE DATE OF 1980 AMENDMENT

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

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

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

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

section 32 of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-600 applicable to amounts paid or

incurred after Dec. 31, 1978, in taxable years ending after such

date, see section 321(d)(1) of Pub. L. 95-600, set out as a note

under section 51 of this title.

EFFECTIVE DATE

Section applicable to taxable years beginning after Dec. 31,

1976, and to credit carrybacks from such years, see section 202(e)

of Pub. L. 95-30, set out as a note under section 51 of this title.

SAVINGS PROVISION

For provisions that nothing in amendment by 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.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 29, 40, 41, 42, 44, 45,

45A, 45E, 45F, 51, 51A, 264, 280C, 448, 453A, 460, 465, 474, 685,

856, 860L, 943, 1044, 1397, 1400L, 5000, 6053, 9701 of this title;

title 42 section 1395y.

-End-

-CITE-

26 USC Subpart G - Credit Against Regular Tax for Prior

Year Minimum Tax Liability 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart G - Credit Against Regular Tax for Prior Year Minimum Tax

Liability

-HEAD-

SUBPART G - CREDIT AGAINST REGULAR TAX FOR PRIOR YEAR MINIMUM TAX

LIABILITY

-MISC1-

Sec.

53. Credit for prior year minimum tax liability.

-SECREF-

SUBPART REFERRED TO IN OTHER SECTIONS

This subpart is referred to in section 6401 of this title.

-End-

-CITE-

26 USC Sec. 53 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART IV - CREDITS AGAINST TAX

Subpart G - Credit Against Regular Tax for Prior Year Minimum Tax

Liability

-HEAD-

Sec. 53. Credit for prior year minimum tax liability

-STATUTE-

(a) Allowance of credit

There shall be allowed as a credit against the tax imposed by

this chapter for any taxable year an amount equal to the minimum

tax credit for such taxable year.

(b) Minimum tax credit

For purposes of subsection (a), the minimum tax credit for any

taxable year is the excess (if any) of -

(1) the adjusted net minimum tax imposed for all prior taxable

years beginning after 1986, over

(2) the amount allowable as a credit under subsection (a) for

such prior taxable years.

(c) Limitation

The credit allowable under subsection (a) for any taxable year

shall not exceed the excess (if any) of -

(1) the regular tax liability of the taxpayer for such taxable

year reduced by the sum of the credits allowable under subparts

A, B, D, E, and F of this part, over

(2) the tentative minimum tax for the taxable year.

(d) Definitions

For purposes of this section -

(1) Net minimum tax

(A) In general

The term "net minimum tax" means the tax imposed by section

55.

(B) Credit not allowed for exclusion preferences

(i) Adjusted net minimum tax

The adjusted net minimum tax for any taxable year is -

(I) the amount of the net minimum tax for such taxable

year, reduced by

(II) the amount which would be the net minimum tax for

such taxable year if the only adjustments and items of tax

preference taken into account were those specified in

clause (ii) and if section 59(a)(2) did not apply.

(ii) Specified items

The following are specified in this clause -

(I) the adjustments provided for in subsection (b)(1) of

section 56, and

(II) the items of tax preference described in paragraphs

(1), (5), and (7) of section 57(a).

(iii) Special rule

The adjusted net minimum tax for the taxable year shall be

increased by the amount of the credit not allowed under

section 29 (relating to credit for producing fuel from a

nonconventional source) solely by reason of the application

of section 29(b)(6)(B), or not allowed under section 30

solely by reason of the application of section 30(b)(3)(B).

(iv) Credit allowable for exclusion preferences of

corporations

In the case of a corporation -

(I) the preceding provisions of this subparagraph shall

not apply, and

(II) the adjusted net minimum tax for any taxable year is

the amount of the net minimum tax for such year increased

in the manner provided in clause (iii).

(2) Tentative minimum tax

The term "tentative minimum tax" has the meaning given to such

term by section 55(b).

-SOURCE-

(Added Pub. L. 99-514, title VII, Sec. 701(b), Oct. 22, 1986, 100

Stat. 2339; amended Pub. L. 100-647, title I, Sec. 1007(g)(4),

title VI, Sec. 6304(a), Nov. 10, 1988, 102 Stat. 3435, 3756; Pub.

L. 101-239, title VII, Secs. 7612(a)(1), (2), (b)(1), 7811(d)(2),

Dec. 19, 1989, 103 Stat. 2373, 2374, 2408; Pub. L. 102-486, title

XIX, Sec. 1913(b)(2)(C), Oct. 24, 1992, 106 Stat. 3020; Pub. L.

103-66, title XIII, Secs. 13113(b)(2), 13171(c), Aug. 10, 1993, 107

Stat. 429, 455; Pub. L. 104-188, title I, Secs. 1205(d)(5),

1704(j)(1), Aug. 20, 1996, 110 Stat. 1776, 1881.)

-MISC1-

PRIOR PROVISIONS

A prior section 53, added Pub. L. 95-30, title II, Sec. 202(b),

May 23, 1977, 91 Stat. 146; amended Pub. L. 95-600, title III, Sec.

321(c)(2), Nov. 6, 1978, 92 Stat. 2835; Pub. L. 97-34, title II,

Sec. 207(c)(2), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97-248, title

II, Sec. 201(d)(8)(A), formerly Sec. 201(c)(8)(A), and Sec.

265(b)(2)(A)(iii), Sept. 3, 1982, 96 Stat. 420, 547, renumbered

Sec. 201(d)(8)(A), Pub. L. 97-448, title III, Sec. 306(a)(1)(A)(i),

Jan. 12, 1983, 96 Stat. 2400; 97-354, Sec. 5(a)(12), Oct. 19, 1982,

96 Stat. 1693; 97-448, title I, Sec. 102(d)(3), Jan. 12, 1983, 96

Stat. 2370; Pub. L. 98-21, title I, Sec. 122(c)(1), Apr. 20, 1983,

97 Stat. 87; Pub. L. 98-369, div. A, title VII, Sec. 713(c)(1)(C),

July 18, 1984, 98 Stat. 957, placed limitations on the amount of

credit allowed by former section 44B for employment of certain new

employees, prior to repeal by Pub. L. 98-369, div. A, title IV,

Sec. 474(p)(8), July 18, 1984, 98 Stat. 838, applicable to taxable

years beginning after Dec. 31, 1983, and to carrybacks from such

years.

AMENDMENTS

1996 - Subsec. (d)(1)(B)(iii). Pub. L. 104-188, Sec.

1205(d)(5)(A), which directed that cl. (iii) be amended by striking

out "or not allowed under section 28 solely by reason of the

application of section 28(d)(2)(B)," was executed by striking out

"not allowed under section 28 solely by reason of the application

of section 28(d)(2)(B)," after "29(b)(6)(B),", to reflect the

probable intent of Congress.

Subsec. (d)(1)(B)(iv)(II). Pub. L. 104-188, Sec. 1704(j)(1),

amended subcl. (II) generally. Prior to amendment, subcl. (II) read

as follows: "the adjusted net minimum tax for any taxable year is

the amount of the net minimum tax for such year increased by the

amount of any credit not allowed under section 29 solely by reason

of the application of section 29(b)(5)(B) or not allowed under

section 28 solely by reason of the application of section

28(d)(2)(B)."

Pub. L. 104-188, Sec. 1205(d)(5)(B), which directed that subcl.

(II) be amended by striking out "or not allowed under section 28

solely by reason of the application of section 28(d)(2)(B)", could

not be executed because the phrase sought to be struck out did not

appear in text subsequent to the general amendment of subcl. (II)

by Pub. L. 104-188, Sec. 1704(j)(1), see above, which, pursuant to

section 1701 of Pub. L. 104-188, set out as a note under section 1

of this title, is treated as having been enacted before section

1205(d)(5)(B) of Pub. L. 104-188.

1993 - Subsec. (d)(1)(B)(ii)(II). Pub. L. 103-66, Sec. 13171(c),

substituted "(5), and (7)" for "(5), (6), and (8)".

Pub. L. 103-66, Sec. 13113(b)(2), substituted "(6), and (8)" for

"and (6)".

1992 - Subsec. (d)(1)(B)(iii). Pub. L. 102-486, Sec.

1913(b)(2)(C)(i), substituted "section 29(b)(6)(B)," for "section

29(b)(5)(B) or".

Pub. L. 102-486, Sec. 1913(b)(2)(C)(ii), inserted before period

at end ", or not allowed under section 30 solely by reason of the

application of section 30(b)(3)(B)".

1989 - Subsec. (d)(1)(B)(i)(II). Pub. L. 101-239, Sec.

7811(d)(2), inserted before period at end "and if section 59(a)(2)

did not apply".

Subsec. (d)(1)(B)(ii). Pub. L. 101-239, Sec. 7612(a)(2),

substituted "subsection (b)(1)" for "subsections (b)(1) and (c)(3)"

in subcl. (I) and struck out at end "In the case of taxable years

beginning after 1989, the adjustments provided in section 56(g)

shall be treated as specified in this clause to the extent

attributable to items which are excluded from gross income for any

taxable year for purposes of the regular tax, or are not deductible

for any taxable year under the adjusted current earnings method of

section 56(g)."

Subsec. (d)(1)(B)(iii). Pub. L. 101-239, Sec. 7612(b)(1), which

directed amendment of cl. (iii) by inserting "or not allowed under

section 28 solely by reason of the application of section

28(d)(2)(B)" after "section 29(d)(5)(B)", was executed by making

the insertion after "section 29(b)(5)(B)", as the probable intent

of Congress.

Subsec. (d)(1)(B)(iv). Pub. L. 101-239, Sec. 7612(b)(1), which

directed amendment of cl. (iv) by inserting "or not allowed under

section 28 solely by reason of the application of section

28(d)(2)(B)" after "section 29(d)(5)(B)", was executed by making

the insertion after "section 29(b)(5)(B)" in subcl. (II), as the

probable intent of Congress.

Pub. L. 101-239, Sec. 7612(a)(1), added cl. (iv).

1988 - Subsec. (d)(1)(B)(ii). Pub. L. 100-647, Sec. 1007(g)(4),

substituted "current earnings" for "earnings and profits" in last

sentence.

Subsec. (d)(1)(B)(iii). Pub. L. 100-647, Sec. 6304(a), added cl.

(iii).

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by section 1205(d)(5) of Pub. L. 104-188 applicable to

amounts paid or incurred in taxable years ending after June 30,

1996, see section 1205(e) of Pub. L. 104-188, set out as a note

under section 29 of this title.

Section 1704(j)(1) of Pub. L. 104-188 provided that the amendment

made by that section is effective with respect to taxable years

beginning after Dec. 31, 1990.

EFFECTIVE DATE OF 1993 AMENDMENT

Section 13113(e) of Pub. L. 103-66 provided that: "The amendments

made by this section [enacting section 1202 of this title and

amending this section and sections 57, 172, 642, 643, 691, 871, and

6652 of this title] shall apply to stock issued after the date of

the enactment of this Act [Aug. 10, 1993]."

Section 13171(d) of Pub. L. 103-66 provided that: "The amendments

made by this section [amending this section and sections 56 and 57

of this title] shall apply to contributions made after June 30,

1992, except that in the case of any contribution of capital gain

property which is not tangible personal property, such amendments

shall apply only if the contribution is made after December 31,

1992."

EFFECTIVE DATE OF 1992 AMENDMENT

Section 1702(e)(5) of Pub. L. 104-188 provided that: "The

amendment made by section 1913(b)(2)(C)(i) of the Energy Policy Act

of 1992 [Pub. L. 102-486] shall apply to taxable years beginning

after December 31, 1990."

Amendment by section 1913(b)(2)(C)(ii) of Pub. L. 102-486

applicable to property placed in service after June 30, 1993, see

section 1913(c) of Pub. L. 102-486, set out as an Effective Date

note under section 30 of this title.

EFFECTIVE DATE OF 1989 AMENDMENT

Section 7612(a)(3) of Pub. L. 101-239 provided that: "The

amendments made by this subsection [amending this section] shall

apply for purposes of determining the adjusted net minimum tax for

taxable years beginning after December 31, 1989."

Section 7612(b)(2) of Pub. L. 101-239 provided that: "The

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

for purposes of determining the amount of the minimum tax credit

for taxable years beginning after December 31, 1989; except that,

for such purposes, section 53(b)(1) of the Internal Revenue Code of

1986 shall be applied as if such amendment had been in effect for

all prior taxable years."

Amendment by section 7811(d)(2) 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 OF 1988 AMENDMENT

Amendment by section 1007(g)(4) 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.

Section 6304(b) of Pub. L. 100-647 provided that: "The amendment

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

if included in the amendments made by section 701 of the Tax Reform

Act of 1986 [Pub. L. 99-514]."

EFFECTIVE DATE

Section applicable to taxable years beginning after Dec. 31,

1986, with certain exceptions and qualifications, see section

701(f) of Pub. L. 99-514, set out as an Effective Date of 1986

Amendment note under section 55 of this title.

APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION

TO TREATY OBLIGATIONS OF UNITED STATES

For applicability of amendment by section 701(b) of Pub. L.

99-514 [enacting this section] notwithstanding any treaty

obligation of the United States in effect on Oct. 22, 1986, with

provision that for such purposes any amendment by title I of Pub.

L. 100-647 be treated as if it had been included in the provision

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

1012(aa)(2), (4) of Pub. L. 100-647, set out as a note under

section 861 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 55, 108, 381, 383, 772,

1374 of this title.

-End-

-CITE-

26 USC [PART V - REPEALED] 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

[PART V - REPEALED]

-HEAD-

[PART V - REPEALED]

-COD-

CODIFICATION

Part V, consisting of a prior section 51, was repealed by Pub. L.

94-455, title XIX, Sec. 1901(a)(7), Oct. 4, 1976, 90 Stat. 1765.

See Prior Provisions note set out under section 51 of this title.

-End-

-CITE-

26 USC PART VI - ALTERNATIVE MINIMUM TAX 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART VI - ALTERNATIVE MINIMUM TAX

-HEAD-

PART VI - ALTERNATIVE MINIMUM TAX

-MISC1-

Sec.

55. Alternative minimum tax imposed.

56. Adjustments in computing alternative minimum taxable

income.

57. Items of tax preference.

58. Denial of certain losses.

59. Other definitions and special rules.

-SECREF-

PART REFERRED TO IN OTHER SECTIONS

This part is referred to in sections 860E, 860J of this title.

-End-

-CITE-

26 USC Sec. 55 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART VI - ALTERNATIVE MINIMUM TAX

-HEAD-

Sec. 55. Alternative minimum tax imposed

-STATUTE-

(a) General rule

There is hereby imposed (in addition to any other tax imposed by

this subtitle) a tax equal to the excess (if any) of -

(1) the tentative minimum tax for the taxable year, over

(2) the regular tax for the taxable year.

(b) Tentative minimum tax

For purposes of this part -

(1) Amount of tentative tax

(A) Noncorporate taxpayers

(i) In general

In the case of a taxpayer other than a corporation, the

tentative minimum tax for the taxable year is the sum of -

(I) 26 percent of so much of the taxable excess as does

not exceed $175,000, plus

(II) 28 percent of so much of the taxable excess as

exceeds $175,000.

The amount determined under the preceding sentence shall be

reduced by the alternative minimum tax foreign tax credit for

the taxable year.

(ii) Taxable excess

For purposes of this subsection, the term "taxable excess"

means so much of the alternative minimum taxable income for

the taxable year as exceeds the exemption amount.

(iii) Married individual filing separate return

In the case of a married individual filing a separate

return, clause (i) shall be applied by substituting "$87,500"

for "$175,000" each place it appears. For purposes of the

preceding sentence, marital status shall be determined under

section 7703.

(B) Corporations

In the case of a corporation, the tentative minimum tax for

the taxable year is -

(i) 20 percent of so much of the alternative minimum

taxable income for the taxable year as exceeds the exemption

amount, reduced by

(ii) the alternative minimum tax foreign tax credit for the

taxable year.

(2) Alternative minimum taxable income

The term "alternative minimum taxable income" means the taxable

income of the taxpayer for the taxable year -

(A) determined with the adjustments provided in section 56

and section 58, and

(B) increased by the amount of the items of tax preference

described in section 57.

If a taxpayer is subject to the regular tax, such taxpayer shall

be subject to the tax imposed by this section (and, if the

regular tax is determined by reference to an amount other than

taxable income, such amount shall be treated as the taxable

income of such taxpayer for purposes of the preceding sentence).

(3) Maximum rate of tax on net capital gain of noncorporate

taxpayers

The amount determined under the first sentence of paragraph

(1)(A)(i) shall not exceed the sum of -

(A) the amount determined under such first sentence computed

at the rates and in the same manner as if this paragraph had

not been enacted on the taxable excess reduced by the lesser of

-

(i) the net capital gain; or

(ii) the sum of -

(I) the adjusted net capital gain, plus

(II) the unrecaptured section 1250 gain, plus

(B) 10 percent of so much of the adjusted net capital gain

(or, if less, taxable excess) as does not exceed the amount on

which a tax is determined under section 1(h)(1)(B), plus

(C) 20 percent of the adjusted net capital gain (or, if less,

taxable excess) in excess of the amount on which tax is

determined under subparagraph (B), plus

(D) 25 percent of the amount of taxable excess in excess of

the sum of the amounts on which tax is determined under the

preceding subparagraphs of this paragraph.

In the case of taxable years beginning after December 31, 2000,

rules similar to the rules of section 1(h)(2) shall apply for

purposes of subparagraphs (B) and (C). Terms used in this

paragraph which are also used in section 1(h) shall have the

respective meanings given such terms by section 1(h) but computed

with the adjustments under this part.

(c) Regular tax

(1) In general

For purposes of this section, the term "regular tax" means the

regular tax liability for the taxable year (as defined in section

26(b)) reduced by the foreign tax credit allowable under section

27(a), the section 936 credit allowable under section 27(b), and

the Puerto Rico economic activity credit under section 30A. Such

term shall not include any increase in tax under section 49(b) or

50(a) or subsection (j) or (k) of section 42.

(2) Cross references

For provisions providing that certain credits are not

allowable against the tax imposed by this section, see sections

26(a), 29(b)(6), 30(b)(3), and 38(c).

(d) Exemption amount

For purposes of this section -

(1) Exemption amount for taxpayers other than corporations

In the case of a taxpayer other than a corporation, the term

"exemption amount" means -

(A) $45,000 ($49,000 in the case of taxable years beginning

in 2001, 2002, 2003, and 2004) in the case of -

(i) a joint return, or

(ii) a surviving spouse,

(B) $33,750 ($35,750 in the case of taxable years beginning

in 2001, 2002, 2003, and 2004) in the case of an individual who

-

(i) is not a married individual, and

(ii) is not a surviving spouse,

(C) 50 percent of the dollar amount applicable under

paragraph (1)(A) in the case of a married individual who files

a separate return, and

(D) $22,500 in the case of an estate or trust.

For purposes of this paragraph, the term "surviving spouse" has

the meaning given to such term by section 2(a), and marital

status shall be determined under section 7703.

(2) Corporations

In the case of a corporation, the term "exemption amount" means

$40,000.

(3) Phase-out of exemption amount

The exemption amount of any taxpayer shall be reduced (but not

below zero) by an amount equal to 25 percent of the amount by

which the alternative minimum taxable income of the taxpayer

exceeds -

(A) $150,000 in the case of a taxpayer described in paragraph

(1)(A) or (2),

(B) $112,500 in the case of a taxpayer described in paragraph

(1)(B), and

(C) $75,000 in the case of a taxpayer described in

subparagraph (C) or (D) of paragraph (1).

In the case of a taxpayer described in paragraph (1)(C),

alternative minimum taxable income shall be increased by the

lesser of (i) 25 percent of the excess of alternative minimum

taxable income (determined without regard to this sentence) over

the minimum amount of such income (as so determined) for which

the exemption amount under paragraph (1)(C) is zero, or (ii) such

exemption amount (determined without regard to this paragraph).

(e) Exemption for small corporations

(1) In general

(A) $7,500,000 gross receipts test

The tentative minimum tax of a corporation shall be zero for

any taxable year if the corporation's average annual gross

receipts for all 3-taxable-year periods ending before such

taxable year does not exceed $7,500,000. For purposes of the

preceding sentence, only taxable years beginning after December

31, 1993, shall be taken into account.

(B) $5,000,000 gross receipts test for first 3-year period

Subparagraph (A) shall be applied by substituting

"$5,000,000" for "$7,500,000" for the first 3-taxable-year

period (or portion thereof) of the corporation which is taken

into account under subparagraph (A).

(C) First taxable year corporation in existence

If such taxable year is the first taxable year that such

corporation is in existence, the tentative minimum tax of such

corporation for such year shall be zero.

(D) Special rules

For purposes of this paragraph, the rules of paragraphs (2)

and (3) of section 448(c) shall apply.

(2) Prospective application of minimum tax if small corporation

ceases to be small

In the case of a corporation whose tentative minimum tax is

zero for any prior taxable year by reason of paragraph (1), the

application of this part for taxable years beginning with the

first taxable year such corporation ceases to be described in

paragraph (1) shall be determined with the following

modifications:

(A) Section 56(a)(1) (relating to depreciation) and section

56(a)(5) (relating to pollution control facilities) shall apply

only to property placed in service on or after the change date.

(B) Section 56(a)(2) (relating to mining exploration and

development costs) shall apply only to costs paid or incurred

on or after the change date.

(C) Section 56(a)(3) (relating to treatment of long-term

contracts) shall apply only to contracts entered into on or

after the change date.

(D) Section 56(a)(4) (relating to alternative net operating

loss deduction) shall apply in the same manner as if, in

section 56(d)(2), the change date were substituted for "January

1, 1987" and the day before the change date were substituted

for "December 31, 1986" each place it appears.

(E) Section 56(g)(2)(B) (relating to limitation on allowance

of negative adjustments based on adjusted current earnings)

shall apply only to prior taxable years beginning on or after

the change date.

(F) Section 56(g)(4)(A) (relating to adjustment for

depreciation to adjusted current earnings) shall not apply.

(G) Subparagraphs (D) and (F) of section 56(g)(4) (relating

to other earnings and profits adjustments and depletion) shall

apply in the same manner as if the day before the change date

were substituted for "December 31, 1989" each place it appears

therein.

(3) Exception

The modifications in paragraph (2) shall not apply to -

(A) any item acquired by the corporation in a transaction to

which section 381 applies, and

(B) any property the basis of which in the hands of the

corporation is determined by reference to the basis of the

property in the hands of the transferor,

if such item or property was subject to any provision referred to

in paragraph (2) while held by the transferor.

(4) Change date

For purposes of paragraph (2), the change date is the first day

of the first taxable year for which the taxpayer ceases to be

described in paragraph (1).

(5) Limitation on use of credit for prior year minimum tax

liability

In the case of a taxpayer whose tentative minimum tax for any

taxable year is zero by reason of paragraph (1), section 53(c)

shall be applied for such year by reducing the amount otherwise

taken into account under section 53(c)(1) by 25 percent of so

much of such amount as exceeds $25,000. Rules similar to the

rules of section 38(c)(3)(B) (!1) shall apply for purposes of the

preceding sentence.

-SOURCE-

(Added and amended Pub. L. 99-514, title II, Sec. 252(c), title

VII, Sec. 701(a), Oct. 22, 1986, 100 Stat. 2205, 2321; Pub. L.

100-647, title I, Secs. 1002(l)(27), 1007(a), Nov. 10, 1988, 102

Stat. 3381, 3428; Pub. L. 101-508, title XI, Secs. 11102(a),

11813(b)(5), Nov. 5, 1990, 104 Stat. 1388-406, 1388-551; Pub. L.

102-318, title V, Sec. 521(b)(1), July 3, 1992, 106 Stat. 310; Pub.

L. 102-486, title XIX, Sec. 1913(b)(2)(D), Oct. 24, 1992, 106 Stat.

3020; Pub. L. 103-66, title XIII, Sec. 13203(a)-(c)(1), Aug. 10,

1993, 107 Stat. 461, 462; Pub. L. 104-188, title I, Secs.

1205(d)(6), 1401(b)(3), 1601(b)(2)(A), Aug. 20, 1996, 110 Stat.

1776, 1788, 1832; Pub. L. 105-34, title III, Sec. 311(b)(1),

(2)(A), title IV, Sec. 401(a), title XVI, Sec. 1601(f)(1)(C), Aug.

5, 1997, 111 Stat. 834, 835, 843, 1090; Pub. L. 105-206, title VI,

Secs. 6005(d)(2), 6006(a), July 22, 1998, 112 Stat. 804, 806; Pub.

L. 107-16, title VII, Sec. 701(a), (b), June 7, 2001, 115 Stat.

148.)

-STATAMEND-

AMENDMENT OF SECTION

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

see Effective and Termination Dates of 2001 Amendment note below.

-REFTEXT-

REFERENCES IN TEXT

Section 38(c)(3)(B), referred to in subsec. (e)(5), was

redesignated section 38(c)(4)(B) by Pub. L. 107-147, title III,

Sec. 301(b)(1), Mar. 9, 2002, 116 Stat. 39.

-MISC1-

PRIOR PROVISIONS

A prior section 55, Pub. L. 95-600, title IV, Sec. 421(a), Nov.

6, 1978, 92 Stat. 2871; amended Pub. L. 96-222, title I, Sec.

104(a)(4)(A)-(D), (G), (H)(i), (ii), (viii), Apr. 1, 1980, 94 Stat.

215-218; Pub. L. 96-223, title II, Sec. 232(b)(2)(A), (c)(2), Apr.

2, 1980, 94 Stat. 276, 277; Pub. L. 96-603, Sec. 4(a), (b), Dec.

28, 1980, 94 Stat. 3513, 3514; Pub. L. 97-34, title I, Sec.

101(d)(1), title II, Sec. 221(b)(1)(A), title III, Sec.

331(d)(1)(A), Aug. 13, 1981, 95 Stat. 183, 246, 294; Pub. L.

97-248, title II, Sec. 201(a), Sept. 3, 1982, 96 Stat. 411; Pub. L.

97-354, Sec. 5(a)(13), Oct. 19, 1982, 96 Stat. 1693; Pub. L.

97-448, title I, Sec. 103(g)(2)(E), title III, Secs. 305(c),

306(a)(1)(B), (C), Jan. 12, 1983, 96 Stat. 2379, 2399, 2400; Pub.

L. 98-369, div. A, title IV, Secs. 474(q), 491(d)(1), title VI,

Sec. 612(e)(3), title VII, Sec. 711(a)(1), (4), (5), July 18, 1984,

98 Stat. 838, 849, 912, 942, 943; Pub. L. 99-514, title XVIII, Sec.

1847(a), Oct. 22, 1986, 100 Stat. 2856, related to alternative

minimum tax for taxpayers other than corporations, prior to the

general revision of this part by Pub. L. 99-514, Sec. 701(a).

AMENDMENTS

2001 - Subsec. (d)(1)(A). Pub. L. 107-16, Secs. 701(a)(1), 901,

temporarily substituted "$45,000 ($49,000 in the case of taxable

years beginning in 2001, 2002, 2003, and 2004)" for "$45,000" in

introductory provisions. See Effective and Termination Dates of

2001 Amendment note below.

Subsec. (d)(1)(B). Pub. L. 107-16, Secs. 701(b)(1), 901,

temporarily struck out "and" at end. See Effective and Termination

Dates of 2001 Amendment note below.

Pub. L. 107-16, Secs. 701(a)(2), 901, temporarily substituted

"$33,750 ($35,750 in the case of taxable years beginning in 2001,

2002, 2003, and 2004)" for "$33,750" in introductory provisions.

See Effective and Termination Dates of 2001 Amendment note below.

Subsec. (d)(1)(C), (D). Pub. L. 107-16, Secs. 701(b)(1), 901,

temporarily added subpars. (C) and (D) and struck out former

subpar. (C) which read as follows: "$22,500 in the case of -

"(i) a married individual who files a separate return, or

"(ii) an estate or trust."

See Effective and Termination Dates of 2001 Amendment note below.

Subsec. (d)(3). Pub. L. 107-16, Secs. 701(b)(3), 901, in

concluding provisions, temporarily substituted "paragraph (1)(C)"

for "paragraph (1)(C)(i)" and "the minimum amount of such income

(as so determined) for which the exemption amount under paragraph

(1)(C) is zero, or (ii) such exemption amount (determined without

regard to this paragraph)" for "$165,000 or (ii) $22,500". See

Effective and Termination Dates of 2001 Amendment note below.

Subsec. (d)(3)(C). Pub. L. 107-16, Secs. 701(b)(2), 901,

temporarily substituted "subparagraph (C) or (D) of paragraph (1)"

for "paragraph (1)(C)". See Effective and Termination Dates of 2001

Amendment note below.

1998 - Subsec. (b)(3). Pub. L. 105-206, Sec. 6005(d)(2),

reenacted par. heading without change and amended text of par. (3)

generally. Prior to amendment, text read as follows: "The amount

determined under the first sentence of paragraph (1)(A)(i) shall

not exceed the sum of -

"(A) the amount determined under such first sentence computed

at the rates and in the same manner as if this paragraph had not

been enacted on the taxable excess reduced by the lesser of -

"(i) the net capital gain, or

"(ii) the sum of -

"(I) the adjusted net capital gain, plus

"(II) the unrecaptured section 1250 gain, plus

"(B) 25 percent of the lesser of -

"(i) the unrecaptured section 1250 gain, or

"(ii) the amount of taxable excess in excess of the sum of -

"(I) the adjusted net capital gain, plus

"(II) the amount on which a tax is determined under

subparagraph (A), plus

"(C) 10 percent of so much of the taxpayer's adjusted net

capital gain (or, if less, taxable excess) as does not exceed the

amount on which a tax is determined under section 1(h)(1)(D),

plus

"(D) 20 percent of the taxpayer's adjusted net capital gain

(or, if less, taxable excess) in excess of the amount on which

tax is determined under subparagraph (C).

In the case of taxable years beginning after December 31, 2000,

rules similar to the rules of section 1(h)(2) shall apply for

purposes of subparagraphs (C) and (D). Terms used in this paragraph

which are also used in section 1(h) shall have the respective

meanings given such terms by section 1(h)."

Subsec. (e)(1). Pub. L. 105-206, Sec. 6006(a), reenacted par.

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

Prior to amendment, text read as follows: "The tentative minimum

tax of a corporation shall be zero for any taxable year if -

"(A) such corporation met the $5,000,000 gross receipts test of

section 448(c) for its first taxable year beginning after

December 31, 1996, and

"(B) such corporation would meet such test for the taxable year

and all prior taxable years beginning after such first taxable

year if such test were applied by substituting '$7,500,000' for

'$5,000,000'."

1997 - Subsec. (b)(1)(A)(ii). Pub. L. 105-34, Sec. 311(b)(2)(A),

substituted "this subsection" for "clause (i)".

Subsec. (b)(3). Pub. L. 105-34, Sec. 311(b)(1), added par. (3).

Subsec. (c)(1). Pub. L. 105-34, Sec. 1601(f)(1)(C), substituted

"Puerto Rico" for "Puerto Rican".

Subsec. (e). Pub. L. 105-34, Sec. 401(a), added subsec. (e).

1996 - Subsec. (c)(1). Pub. L. 104-188, Sec. 1601(b)(2)(A),

substituted ", the section 936 credit allowable under section

27(b), and the Puerto Rican economic activity credit under section

30A" for "and the section 936 credit allowable under section

27(b)".

Pub. L. 104-188, Sec. 1401(b)(3), struck out "shall not include

any tax imposed by section 402(d) and" before "shall not include

any increase in tax under section 49(b)".

Subsec. (c)(2). Pub. L. 104-188, Sec. 1205(d)(6), struck out

"28(d)(2)," after "26(a),".

1993 - Subsec. (b)(1). Pub. L. 103-66, Sec. 13203(a), amended

heading and text of par. (1) generally. Prior to amendment, text

read as follows: "The tentative minimum tax for the taxable year is

-

"(A) 20 percent (24 percent in the case of a taxpayer other

than a corporation) of so much of the alternative minimum taxable

income for the taxable year as exceeds the exemption amount,

reduced by

"(B) the alternative minimum tax foreign tax credit for the

taxable year."

Subsec. (d)(1). Pub. L. 103-66, Sec. 13203(b), substituted

"$45,000" for "$40,000" in subpar. (A), "$33,750" for "$30,000" in

subpar. (B), and "$22,500" for "$20,000" in subpar. (C).

Subsec. (d)(3). Pub. L. 103-66, Sec. 13203(c)(1), substituted

"$165,000 or (ii) $22,500" for "$155,000 or (ii) $20,000" in last

sentence.

1992 - Subsec. (c)(1). Pub. L. 102-318 substituted "402(d)" for

"402(e)".

Subsec. (c)(2). Pub. L. 102-486 substituted "29(b)(6), 30(b)(3),"

for "29(b)(5),".

1990 - Subsec. (b)(1)(A). Pub. L. 101-508, Sec. 11102(a),

substituted "24 percent" for "21 percent".

Subsec. (c)(1). Pub. L. 101-508, Sec. 11813(b)(5), substituted

"section 49(b) or 50(a)" for "section 47".

1988 - Subsec. (b)(2). Pub. L. 100-647, Sec. 1007(a)(2), inserted

at end "If a taxpayer is subject to the regular tax, such taxpayer

shall be subject to the tax imposed by this section (and, if the

regular tax is determined by reference to an amount other than

taxable income, such amount shall be treated as the taxable income

of such taxpayer for purposes of the preceding sentence)."

Subsec. (c)(1). Pub. L. 100-647, Sec. 1007(a)(1), inserted "and

the section 936 credit allowable under section 27(b)" before period

at end of first sentence.

Pub. L. 100-647, Sec. 1002(l)(27), substituted "subsection (j) or

(k) of section 42" for "section 42(j)".

Subsec. (d)(3). Pub. L. 100-647, Sec. 1007(a)(3), inserted at end

"In the case of a taxpayer described in paragraph (1)(C)(i),

alternative minimum taxable income shall be increased by the lesser

of (i) 25 percent of the excess of alternative minimum taxable

income (determined without regard to this sentence) over $155,000,

or (ii) $20,000."

1986 - Subsec. (c)(1). Pub. L. 99-514, Sec. 252(c), inserted "or

section 42(j)".

EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT

Pub. L. 107-16, title VII, Sec. 701(c), June 7, 2001, 115 Stat.

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

this section] shall apply to taxable years beginning after December

31, 2000."

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

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

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

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

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

EFFECTIVE DATE OF 1998 AMENDMENT

Amendment by Pub. L. 105-206 effective, except as otherwise

provided, as if included in the provisions of the Taxpayer Relief

Act of 1997, Pub. L. 105-34, to which such amendment relates, see

section 6024 of Pub. L. 105-206, set out as a note under section 1

of this title.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by section 311(b)(1), (2)(A) of Pub. L. 105-34

applicable to taxable years ending after May 6, 1997, see section

311(d) of Pub. L. 105-34, set out as a note under section 1 of this

title.

Section 401(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."

Amendment by section 1601(f)(1)(C) 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 AMENDMENT

Amendment by section 1205(d)(6) of Pub. L. 104-188 applicable to

amounts paid or incurred in taxable years ending after June 30,

1996, see section 1205(e) of Pub. L. 104-188, set out as a note

under section 29 of this title.

Amendment by section 1401(b)(3) of Pub. L. 104-188 applicable to

taxable years beginning after Dec. 31, 1999, with retention of

certain transition rules, see section 1401(c) of Pub. L. 104-188,

set out as a note under section 402 of this title.

Amendment by section 1601(b)(2)(A) of Pub. L. 104-188 applicable

to taxable years beginning after Dec. 31, 1995, except as otherwise

provided, see section 1601(c) of Pub. L. 104-188, set out as an

Effective Date note under section 30A of this title.

EFFECTIVE DATE OF 1993 AMENDMENT

Section 13203(d) of Pub. L. 103-66 provided that: "The amendments

made by this section [amending this section and section 897 of this

title] shall apply to taxable years beginning after December 31,

1992."

EFFECTIVE DATE OF 1992 AMENDMENTS

Amendment by Pub. L. 102-486 applicable to property placed in

service after June 30, 1993, see section 1913(c) of Pub. L.

102-486, set out as an Effective Date note under section 30 of this

title.

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 1990 AMENDMENT

Section 11102(b) of Pub. L. 101-508 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

taxable years beginning after December 31, 1990."

Amendment by section 11813(b)(5) of Pub. L. 101-508 applicable to

property placed in service after Dec. 31, 1990, but not applicable

to any transition property (as defined in section 49(e) of this

title), any property with respect to which qualified progress

expenditures were previously taken into account under section 46(d)

of this title, and any property described in section 46(b)(2)(C) of

this title, as such sections were in effect on Nov. 4, 1990, see

section 11813(c) of Pub. L. 101-508, set out as a note under

section 29 of this title.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by section 1002(l)(27) 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.

Section 1007(a)(3) of Pub. L. 100-647 provided that the amendment

made by that section is effective with respect to taxable years

ending after Nov. 10, 1988.

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by Pub. L. 99-514 applicable to buildings placed in

service after Dec. 31, 1986, in taxable years ending after such

date, see section 252(e) of Pub. L. 99-514, set out as an Effective

Date note under section 42 of this title.

EFFECTIVE DATE

Section 701(f) of Pub. L. 99-514, as amended by Pub. L. 100-647,

title I, Sec. 1007(f)(2), (3), Nov. 10, 1988, 102 Stat. 3433,

provided that:

"(1) In general. - Except as otherwise provided in this

subsection, the amendments made by this section [enacting this

section and sections 53 and 56 to 59 of this title and amending

sections 5, 12, 26, 28, 29, 38, 48, 173, 174, 263, 381, 443, 703,

882, 897, 904, 936, 1016, 1363, 1366, 1561, 6154, 6425, and 6655 of

this title] shall apply to taxable years beginning after December

31, 1986.

"(2) Adjustment of net operating loss. -

"(A) Individuals. - In the case of a net operating loss of an

individual for a taxable year beginning after December 31, 1982,

and before January 1, 1987, for purposes of determining the

amount of such loss which may be carried to a taxable year

beginning after December 31, 1986, for purposes of the minimum

tax, such loss shall be adjusted in the manner provided in

section 55(d)(2) of the Internal Revenue Code of 1954 [now 1986]

as in effect on the day before the date of the enactment of this

Act [Oct. 22, 1986].

"(B) Corporations. - If the minimum tax of a corporation was

deferred under section 56(b) of the Internal Revenue Code of 1954

[now 1986] (as in effect on the day before the date of the

enactment of this Act [Oct. 22, 1986]) for any taxable year

beginning before January 1, 1987, and the amount of such tax has

not been paid for any taxable year beginning before January 1,

1987, the amount of the net operating loss carryovers of such

corporation which may be carried to taxable years beginning after

December 31, 1986, for purposes of the minimum tax shall be

reduced by the amount of tax preferences a tax on which was so

deferred.

"(3) Installment sales. - Section 56(a)(6) of the Internal

Revenue Code of 1986 (as amended by this section) shall not apply

to any disposition to which the amendments made by section 811 of

this Act [enacting section 453C of this title] (relating to

allocation of dealer's indebtedness to installment obligations) do

not apply by reason of section 811(c)(2) of this Act [enacting

provisions set out as a note under section 453C of this title].

"(4) Exception for charitable contributions before august 16,

1986. - Section 57(a)(6) of the Internal Revenue Code of 1986 (as

amended by this section) shall not apply to any deduction

attributable to contributions made before August 16, 1986.

"(5) Book income. -

"(A) In general. - In the case of a corporation to which this

paragraph applies, the amount of any increase for any taxable

year under section 56(c)(1)(A) of the Internal Revenue Code of

1986 (as added by this section) shall be reduced (but not below

zero) by the excess (if any) of -

"(i) 50 percent of the excess of taxable income for the

5-taxable year period ending with the taxable year preceding

the 1st taxable year to which such section applies over the

adjusted net book income for such period, over

"(ii) the aggregate amounts taken into account under this

paragraph for preceding taxable years.

"(B) Taxpayer to whom paragraph applies. - This paragraph

applies to a taxpayer which was incorporated in Delaware on May

31, 1912.

"(C) Terms. - Any term used in this paragraph which is used in

section 56 of such Code (as so added) shall have the same meaning

as when used in such section.

"(6) Certain public utility. -

"(A) In the case of investment tax credits described in

subparagraph (B) or (C), subsection 38(c)(3)(A)(ii) of the

Internal Revenue Code of 1986 shall be applied by substituting

'25 percent' for '75 percent', and section 38(c)(3)(B) of the

Internal Revenue Code of 1986 shall be applied by substituting

'75 percent' for '25 percent'.

"(B) If, on September 25, 1985, a regulated electric utility

owned an undivided interest, within the range of 1,111 and 1,149,

in the 'maximum dependable capacity, net, megawatts electric' of

an electric generating unit located in Illinois or Mississippi

for which a binding written contract was in effect on December

31, 1980, then any investment tax credit with respect to such

unit shall be described in this subparagraph. The aggregate

amount of investment tax credits with respect to the unit in

Mississippi allowed solely by reason of being described in this

subparagraph shall not exceed $141,000,000.

"(C) If, on September 25, 1985, a regulated electric utility

owned an undivided interest, within the range of 1,104 and 1,111,

in the 'maximum dependable capacity, net, megawatts electric' of

an electric generating unit located in Louisiana for which a

binding written contract was in effect on December 31, 1980, then

any investment tax credit of such electric utility shall be

described in this subparagraph. The aggregate amount of

investment tax credits allowed solely by reason of being

described by this subparagraph shall not exceed $20,000,000.

"(7) Agreement vessel depreciation adjustment. -

"(A) For purposes of part VI of subchapter A of chapter 1 of

the Internal Revenue Code of 1986, in the case of a qualified

taxpayer, alternative minimum taxable income for the taxable year

shall be reduced by an amount equal to the agreement vessel

depreciation adjustment.

"(B) For purposes of this paragraph, the agreement vessel

depreciation adjustment shall be an amount equal to the

depreciation deduction that would have been allowable for such

year under section 167 of such Code with respect to agreement

vessels placed in service before January 1, 1987, if the basis of

such vessels had not been reduced under section 607 of the

Merchant Marine Act of 1936 [46 App. U.S.C. 1177], as amended,

and if depreciation with respect to such vessel had been computed

using the 25-year straight-line method. The aggregate amount by

which basis of a qualified taxpayer is treated as not reduced by

reason of this subparagraph shall not exceed $100,000,000.

"(C) For purposes of this paragraph, the term 'qualified

taxpayer' means a parent corporation incorporated in the State of

Delaware on December 1, 1972, and engaged in water

transportation, and includes any other corporation which is a

member of the affiliated group of which the parent corporation is

the common parent. No taxpayer shall be treated as a qualified

corporation for any taxable year beginning after December 31,

1991."

SAVINGS PROVISION

For provisions that nothing in amendment by section 11813(b)(5)

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.

TRANSITIONAL PROVISIONS

Section 1007(f)(1) of Pub. L. 100-647 provided that: "In the case

of the taxable year of an estate or trust which begins before

January 1, 1987, and ends on or after such date, the items of tax

preference apportioned to any beneficiary of such estate or trust

under section 58(c) of the Internal Revenue Code of 1954 (as in

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

Reform Act of 1986 [Oct. 22, 1986]) shall be taken into account for

purposes of determining the amount of the tax imposed by section 55

of the Internal Revenue Code of 1986 (as amended by the Tax Reform

Act of 1986 [Pub. L. 99-514]) on such beneficiary for such

beneficiary's taxable year in which such taxable year of the estate

or trust ends."

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.

APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION

TO TREATY OBLIGATIONS OF UNITED STATES

For applicability of amendment by section 701(a) of Pub. L.

99-514 [enacting this section] notwithstanding any treaty

obligation of the United States in effect on Oct. 22, 1986, with

provision that for such purposes any amendment by title I of Pub.

L. 100-647 be treated as if it had been included in the provision

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

1012(aa)(2), (4) of Pub. L. 100-647, set out as a note under

section 861 of this title.

HIGH INCOME TAXPAYER REPORT

Section 2123 of Pub. L. 94-455, as amended by Pub. L. 98-369,

div. A, title IV, Sec. 441(b)(1), July 18, 1984, 98 Stat. 815,

provided that: "The Secretary of the Treasury shall publish

annually information on the amount of tax paid by individual

taxpayers with high total incomes. Total income for this purpose is

to be calculated and set forth by adding to adjusted gross income

any items of tax preference excluded from, or deducted in arriving

at, adjusted gross income, and by subtracting any investment

expenses incurred in the production of such income to the extent of

the investment income. These data are to include the number of such

individuals with total income over $200,000 who owe no Federal

income tax (after credits) and the deductions, exclusions, or

credits used by them to avoid tax."

[Section 441(b)(2) of Pub. L. 98-369 provided that: "The

amendment made by paragraph (1) [amending section 2123 of Pub. L.

94-455, set out above] shall apply to information published after

the date of the enactment of this Act [July 18, 1984]."]

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 2, 5, 11, 12, 23, 24,

25B, 26, 38, 45A, 45D, 45F, 53, 59, 59A, 168, 443, 641, 666, 815,

847, 860E, 860J, 871, 877, 882, 897, 962, 1260, 1397E, 1400I, 1561,

6015, 6425, 6428, 6655, 6662 of this title.

-FOOTNOTE-

(!1) See References in Text note below.

-End-

-CITE-

26 USC Sec. 56 01/06/03

-EXPCITE-

TITLE 26 - INTERNAL REVENUE CODE

Subtitle A - Income Taxes

CHAPTER 1 - NORMAL TAXES AND SURTAXES

Subchapter A - Determination of Tax Liability

PART VI - ALTERNATIVE MINIMUM TAX

-HEAD-

Sec. 56. Adjustments in computing alternative minimum taxable

income

-STATUTE-

(a) Adjustments applicable to all taxpayers

In determining the amount of the alternative minimum taxable

income for any taxable year the following treatment shall apply (in

lieu of the treatment applicable for purposes of computing the

regular tax):

(1) Depreciation

(A) In general

(i) Property other than certain personal property

Except as provided in clause (ii), the depreciation

deduction allowable under section 167 with respect to any

tangible property placed in service after December 31, 1986,

shall be determined under the alternative system of section

168(g). In the case of property placed in service after

December 31, 1998, the preceding sentence shall not apply but

clause (ii) shall continue to apply.

(ii) 150-percent declining balance method for certain

property

The method of depreciation used shall be -

(I) the 150 percent declining balance method,

(II) switching to the straight line method for the 1st

taxable year for which using the straight line method with

respect to the adjusted basis as of the beginning of the

year will yield a higher allowance.

The preceding sentence shall not apply to any section 1250

property (as defined in section 1250(c)) (and the straight

line method shall be used for such section 1250 property) or

to any other property if the depreciation deduction

determined under section 168 with respect to such other

property for purposes of the regular tax is determined by

using the straight line method.

(B) Exception for certain property

This paragraph shall not apply to property described in

paragraph (1), (2), (3), or (4) of section 168(f).

(C) Coordination with transitional rules

(i) In general

This paragraph shall not apply to property placed in

service after December 31, 1986, to which the amendments made

by section 201 of the Tax Reform Act of 1986 do not apply by

reason of section 203, 204, or 251(d) of such Act.

(ii) Treatment of certain property placed in service before

1987

This paragraph shall apply to any property to which the

amendments made by section 201 of the Tax Reform Act of 1986

apply by reason of an election under section 203(a)(1)(B) of

such Act without regard to the requirement of subparagraph

(A) that the property be placed in service after December 31,

1986.

(D) Normalization rules

With respect to public utility property described in section

168(i)(10), the Secretary shall prescribe the requirements of a

normalization method of accounting for this section.

(2) Mining exploration and development costs

(A) In general

With respect to each mine or other natural deposit (other

than an oil, gas, or geothermal well) of the taxpayer, the

amount allowable as a deduction under section 616(a) or 617(a)

(determined without regard to section 291(b)) in computing the

regular tax for costs paid or incurred after December 31, 1986,

shall be capitalized and amortized ratably over the 10-year

period beginning with the taxable year in which the

expenditures were made.

(B) Loss allowed

If a loss is sustained with respect to any property described

in subparagraph (A), a deduction shall be allowed for the

expenditures described in subparagraph (A) for the taxable year

in which such loss is sustained in an amount equal to the

lesser of -

(i) the amount allowable under section 165(a) for the

expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not

previously been amortized under subparagraph (A).

(3) Treatment of certain long-term contracts

In the case of any long-term contract entered into by the

taxpayer on or after March 1, 1986, the taxable income from such

contract shall be determined under the percentage of completion

method of accounting (as modified by section 460(b)). For

purposes of the preceding sentence, in the case of a contract

described in section 460(e)(1), the percentage of the contract

completed shall be determined under section 460(b)(1) by using

the simplified procedures for allocation of costs prescribed

under section 460(b)(3). The first sentence of this paragraph

shall not apply to any home construction contract (as defined in

section 460(e)(6)).

(4) Alternative tax net operating loss deduction

The alternative tax net operating loss deduction shall be

allowed in lieu of the net operating loss deduction allowed under

section 172.

(5) Pollution control facilities

In the case of any certified pollution control facility placed

in service after December 31, 1986, the deduction allowable under

section 169 (without regard to section 291) shall be determined

under the alternative system of section 168(g). In the case of

such a facility placed in service after December 31, 1998, such

deduction shall be determined under section 168 using the

straight line method.

(6) Adjusted basis

The adjusted basis of any property to which paragraph (1) or

(5) applies (or with respect to which there are any expenditures

to which paragraph (2) or subsection (b)(2) applies) shall be

determined on the basis of the treatment prescribed in paragraph

(1), (2), or (5), or subsection (b)(2), whichever applies.

(7) Section 87 not applicable

Section 87 (relating to alcohol fuel credit) shall not apply.

(b) Adjustments applicable to individuals

In determining the amount of the alternative minimum taxable

income of any taxpayer (other than a corporation), the following

treatment shall apply (in lieu of the treatment applicable for

purposes of computing the regular tax):

(1) Limitation on deductions

(A) In general

No deduction shall be allowed -

(i) for any miscellaneous itemized deduction (as defined in

section 67(b)), or

(ii) for any taxes described in paragraph (1), (2), or (3)

of section 164(a).

Clause (ii) shall not apply to any amount allowable in

computing adjusted gross income.

(B) Medical expenses

In determining the amount allowable as a deduction under

section 213, subsection (a) of section 213 shall be applied by

substituting "10 percent" for "7.5 percent".

(C) Interest

In determining the amount allowable as a deduction for

interest, subsections (d) and (h) of section 163 shall apply,

except that -

(i) in lieu of the exception under section 163(h)(2)(D),

the term "personal interest" shall not include any qualified

housing interest (as defined in subsection (e)),

(ii) sections 163(d)(6) and 163(h)(5) (relating to

phase-ins) shall not apply,

(iii) interest on any specified private activity bond (and

any amount treated as interest on a specified private

activity bond under section 57(a)(5)(B)), and any deduction

referred to in section 57(a)(5)(A), shall be treated as

includible in gross income (or as deductible) for purposes of

applying section 163(d),

(iv) in lieu of the exception under section

163(d)(3)(B)(i), the term "investment interest" shall not

include any qualified housing interest (as defined in

subsection (e)), and

(v) the adjustments of this section and sections 57 and 58

shall apply in determining net investment income under

section 163(d).

(D) Treatment of certain recoveries

No recovery of any tax to which subparagraph (A)(ii) applied

shall be included in gross income for purposes of determining

alternative minimum taxable income.

(E) Standard deduction and deduction for personal exemptions

not allowed

The standard deduction under section 63(c), the deduction for

personal exemptions under section 151, and the deduction under

section 642(b) shall not be allowed.

(F) Section 68 not applicable

Section 68 shall not apply.

(2) Circulation and research and experimental expenditures

(A) In general

The amount allowable as a deduction under section 173 or

174(a) in computing the regular tax for amounts paid or

incurred after December 31, 1986, shall be capitalized and -

(i) in the case of circulation expenditures described in

section 173, shall be amortized ratably over the 3-year

period beginning with the taxable year in which the

expenditures were made, or

(ii) in the case of research and experimental expenditures

described in section 174(a), shall be amortized ratably over

the 10-year period beginning with the taxable year in which

the expenditures were made.

(B) Loss allowed

If a loss is sustained with respect to any property described

in subparagraph (A), a deduction shall be allowed for the

expenditures described in subparagraph (A) for the taxable year

in which such loss is sustained in an amount equal to the

lesser of -

(i) the amount allowable under section 165(a) for the

expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not

previously been amortized under subparagraph (A).

(C) Special rule for personal holding companies

In the case of circulation expenditures described in section

173, the adjustments provided in this paragraph shall apply

also to a personal holding company (as defined in section 542).

(D) Exception for certain research and experimental

expenditures

If the taxpayer materially participates (within the meaning

of section 469(h)) in an activity, this paragraph shall not

apply to any amount allowable as a deduction under section

174(a) for expenditures paid or incurred in connection with

such activity.

(3) Treatment of incentive stock options

Section 421 shall not apply to the transfer of stock acquired

pursuant to the exercise of an incentive stock option (as defined

in section 422). Section 422(c)(2) shall apply in any case where

the disposition and the inclusion for purposes of this part are

within the same taxable year and such section shall not apply in

any other case. The adjusted basis of any stock so acquired shall

be determined on the basis of the treatment prescribed by this

paragraph.

(c) Adjustments applicable to corporations

In determining the amount of the alternative minimum taxable

income of a corporation, the following treatment shall apply:

(1) Adjustment for adjusted current earnings

Alternative minimum taxable income shall be adjusted as

provided in subsection (g).

(2) Merchant marine capital construction funds

In the case of a capital construction fund established under

section 607 of the Merchant Marine Act, 1936 (46 (!1) U.S.C.

1177) -

(A) subparagraphs (A), (B), and (C) of section 7518(c)(1)

(and the corresponding provisions of such section 607) shall

not apply to -

(i) any amount deposited in such fund after December 31,

1986, or

(ii) any earnings (including gains and losses) after

December 31, 1986, on amounts in such fund, and

(B) no reduction in basis shall be made under section 7518(f)

(or the corresponding provisions of such section 607) with

respect to the withdrawal from the fund of any amount to which

subparagraph (A) applies.

For purposes of this paragraph, any withdrawal of deposits or

earnings from the fund shall be treated as allocable first to

deposits made before (and earnings received or accrued before)

January 1, 1987.

(3) Special deduction for certain organizations not allowed

The deduction determined under section 833(b) shall not be

allowed.

(d) Alternative tax net operating loss deduction defined

(1) In general

For purposes of subsection (a)(4), the term "alternative tax

net operating loss deduction" means the net operating loss

deduction allowable for the taxable year under section 172,

except that -

(A) the amount of such deduction shall not exceed the sum of

-

(i) the lesser of -

(I) the amount of such deduction attributable to net

operating losses (other than the deduction attributable to

carryovers described in clause (ii)(I)), or

(II) 90 percent of alternative minimum taxable income

determined without regard to such deduction, plus

(ii) the lesser of -

(I) the amount of such deduction attributable to the sum

of carrybacks of net operating losses for taxable years

ending during 2001 or 2002 and carryforwards of net

operating losses to taxable years ending during 2001 and

2002, or

(II) alternative minimum taxable income determined

without regard to such deduction reduced by the amount

determined under clause (i), and

(B) in determining the amount of such deduction -

(i) the net operating loss (within the meaning of section

172(c)) for any loss year shall be adjusted as provided in

paragraph (2), and

(ii) appropriate adjustments in the application of section

172(b)(2) shall be made to take into account the limitation

of subparagraph (A).

(2) Adjustments to net operating loss computation

(A) Post-1986 loss years

In the case of a loss year beginning after December 31, 1986,

the net operating loss for such year under section 172(c) shall

-

(i) be determined with the adjustments provided in this

section and section 58, and

(ii) be reduced by the items of tax preference determined

under section 57 for such year.

An item of tax preference shall be taken into account under

clause (ii) only to the extent such item increased the amount

of the net operating loss for the taxable year under section

172(c).

(B) Pre-1987 years

In the case of loss years beginning before January 1, 1987,

the amount of the net operating loss which may be carried over

to taxable years beginning after December 31, 1986, for

purposes of paragraph (2), shall be equal to the amount which

may be carried from the loss year to the first taxable year of

the taxpayer beginning after December 31, 1986.

(e) Qualified housing interest

For purposes of this part -

(1) In general

The term "qualified housing interest" means interest which is

qualified residence interest (as defined in section 163(h)(3))

and is paid or accrued during the taxable year on indebtedness

which is incurred in acquiring, constructing, or substantially

improving any property which -

(A) is the principal residence (within the meaning of section

121) of the taxpayer at the time such interest accrues, or

(B) is a qualified dwelling which is a qualified residence

(within the meaning of section 163(h)(4)).

Such term also includes interest on any indebtedness resulting

from the refinancing of indebtedness meeting the requirements of

the preceding sentence; but only to the extent that the amount of

the indebtedness resulting from such refinancing does not exceed

the amount of the refinanced indebtedness immediately before the

refinancing.

(2) Qualified dwelling

The term "qualified dwelling" means any -

(A) house,

(B) apartment,

(C) condominium, or

(D) mobile home not used on a transient basis (within the

meaning of section 7701(a)(19)(C)(v)),

including all structures or other property appurtenant thereto.

(3) Special rule for indebtedness incurred before July 1, 1982

The term "qualified housing interest" includes interest which

is qualified residence interest (as defined in section 163(h)(3))

and is paid or accrued on indebtedness which -

(A) was incurred by the taxpayer before July 1, 1982, and

(B) is secured by property which, at the time such

indebtedness was incurred, was -

(i) the principal residence (within the meaning of section

121) of the taxpayer, or

(ii) a qualified dwelling used by the taxpayer (or any

member of his family (within the meaning of section

267(c)(4))).

[(f) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(3), Nov. 5,

1990, 104 Stat. 1388-520]

(g) Adjustments based on adjusted current earnings

(1) In general

The alternative minimum taxable income of any corporation for

any taxable year shall be increased by 75 percent of the excess

(if any) of -

(A) the adjusted current earnings of the corporation, over

(B) the alternative minimum taxable income (determined

without regard to this subsection and the alternative tax net

operating loss deduction).

(2) Allowance of negative adjustments

(A) In general

The alternative minimum taxable income for any corporation of

any taxable year, shall be reduced by 75 percent of the excess

(if any) of -

(i) the amount referred to in subparagraph (B) of paragraph

(1), over

(ii) the amount referred to in subparagraph (A) of

paragraph (1).

(B) Limitation

The reduction under subparagraph (A) for any taxable year

shall not exceed the excess (if any) of -

(i) the aggregate increases in alternative minimum taxable

income under paragraph (1) for prior taxable years, over

(ii) the aggregate reductions under subparagraph (A) of

this paragraph for prior taxable years.

(3) Adjusted current earnings

For purposes of this subsection, the term "adjusted current

earnings" means the alternative minimum taxable income for the

taxable year -

(A) determined with the adjustments provided in paragraph

(4), and

(B) determined without regard to this subsection and the

alternative tax net operating loss deduction.

(4) Adjustments

In determining adjusted current earnings, the following

adjustments shall apply:

(A) Depreciation

(i) Property placed in service after 1989

The depreciation deduction with respect to any property

placed in service in a taxable year beginning after 1989

shall be determined under the alternative system of section

168(g). The preceding sentence shall not apply to any

property placed in service after December 31, 1993, and the

depreciation deduction with respect to such property shall be

determined under the rules of subsection (a)(1)(A).

(ii) Property to which new ACRS system applies

In the case of any property to which the amendments made by

section 201 of the Tax Reform Act of 1986 apply and which is

placed in service in a taxable year beginning before 1990,

the depreciation deduction shall be determined -

(I) by taking into account the adjusted basis of such

property (as determined for purposes of computing

alternative minimum taxable income) as of the close of the

last taxable year beginning before January 1, 1990, and

(II) by using the straight-line method over the remainder

of the recovery period applicable to such property under

the alternative system of section 168(g).

(iii) Property to which original ACRS system applies

In the case of any property to which section 168 (as in

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

Reform Act of 1986 and without regard to subsection

(d)(1)(A)(ii) thereof) applies and which is placed in service

in a taxable year beginning before 1990, the depreciation

deduction shall be determined -

(I) by taking into account the adjusted basis of such

property (as determined for purposes of computing the

regular tax) as of the close of the last taxable year

beginning before January 1, 1990, and

(II) by using the straight line method over the remainder

of the recovery period which would apply to such property

under the alternative system of section 168(g).

(iv) Property placed in service before 1981

In the case of any property not described in clause (i),

(ii), or (iii), the amount allowable as depreciation or

amortization with respect to such property shall be

determined in the same manner as for purposes of computing

taxable income.

(v) Special rule for certain property

In the case of any property described in paragraph (1),

(2), (3), or (4) of section 168(f), the amount of

depreciation allowable for purposes of the regular tax shall

be treated as the amount allowable under the alternative

system of section 168(g).

(B) Inclusion of items included for purposes of computing

earnings and profits

(i) In general

In the case of any amount which is excluded from gross

income for purposes of computing alternative minimum taxable

income but is taken into account in determining the amount of

earnings and profits -

(I) such amount shall be included in income in the same

manner as if such amount were includible in gross income

for purposes of computing alternative minimum taxable

income, and

(II) the amount of such income shall be reduced by any

deduction which would have been allowable in computing

alternative minimum taxable income if such amount were

includible in gross income.

The preceding sentence shall not apply in the case of any

amount excluded from gross income under section 108 (or the

corresponding provisions of prior law) or under section 114.

In the case of any insurance company taxable under section

831(b), this clause shall not apply to any amount not

described in section 834(b).

(ii) Inclusion of buildup in life insurance contracts

In the case of any life insurance contract -

(I) the income on such contract (as determined under

section 7702(g)) for any taxable year shall be treated as

includible in gross income for such year, and

(II) there shall be allowed as a deduction that portion

of any premium which is attributable to insurance coverage.

(C) Disallowance of items not deductible in computing earnings

and profits

(i) In general

A deduction shall not be allowed for any item if such item

would not be deductible for any taxable year for purposes of

computing earnings and profits.

(ii) Special rule for certain dividends

(I) In general

Clause (i) shall not apply to any deduction allowable

under section 243 or 245 for any dividend which is a

100-percent dividend or which is received from a 20-percent

owned corporation (as defined in section 243(c)(2)), but

only to the extent such dividend is attributable to income

of the paying corporation which is subject to tax under

this chapter (determined after the application of sections

30A, 936 (including subsections (a)(4), (i), and (j)

thereof) and 921).(!2)

(II) 100-percent dividend

For purposes of subclause (I), the term "100 percent

dividend" means any dividend if the percentage used for

purposes of determining the amount allowable as a deduction

under section 243 or 245 with respect to such dividend is

100 percent.

(iii) Treatment of taxes on dividends from 936 corporations

(I) In general

For purposes of determining the alternative minimum

foreign tax credit, 75 percent of any withholding or income

tax paid to a possession of the United States with respect

to dividends received from a corporation eligible for the

credit provided by section 936 shall be treated as a tax

paid to a foreign country by the corporation receiving the

dividend.

(II) Limitation

If the aggregate amount of the dividends referred to in

subclause (I) for any taxable year exceeds the excess

referred to in paragraph (1), the amount treated as tax

paid to a foreign country under subclause (I) shall not

exceed the amount which would be so treated without regard

to this subclause multiplied by a fraction the numerator of

which is the excess referred to in paragraph (1) and the

denominator of which is the aggregate amount of such

dividends.

(III) Treatment of taxes imposed on 936 corporation

For purposes of this clause, taxes paid by any

corporation eligible for the credit provided by section 936

to a possession of the United States shall be treated as a

withholding tax paid with respect to any dividend paid by

such corporation to the extent such taxes would be treated

as paid by the corporation receiving the dividend under

rules similar to the rules of section 902 (and the amount

of any such dividend shall be increased by the amount so

treated).

(IV) Separate application of foreign tax credit limitations

In determining the alternative minimum foreign tax

credit, section 904(d) shall be applied as if dividends

from a corporation eligible for the credit provided by

section 936 were a separate category of income referred to

in a subparagraph of section 904(d)(1).

(V) Coordination with limitation on 936 credit

Any reference in this clause to a dividend received from

a corporation eligible for the credit provided by section

936 shall be treated as a reference to the portion of any

such dividend for which the dividends received deduction is

disallowed under clause (i) after the application of clause

(ii)(I).

(VI) Application to section 30A corporations

References in this clause to section 936 shall be treated

as including references to section 30A.

(iv) Special rule for certain dividends received by certain

cooperatives

In the case of a cooperative described in section

927(a)(4),(!3) clause (i) shall not apply to any amount

allowable as a deduction under section 245(c).

(D) Certain other earnings and profits adjustments

(i) Intangible drilling costs

The adjustments provided in section 312(n)(2)(A) shall

apply in the case of amounts paid or incurred in taxable

years beginning after December 31, 1989. In the case of a

taxpayer other than an integrated oil company (as defined in

section 291(b)(4)), in the case of any oil or gas well, this

clause shall not apply in the case of amounts paid or

incurred in taxable years beginning after December 31, 1992.

(ii) Certain amortization provisions not to apply

Sections 173 and 248 shall not apply to expenditures paid

or incurred in taxable years beginning after December 31,

1989.

(iii) LIFO inventory adjustments

The adjustments provided in section 312(n)(4) shall apply,

but only with respect to taxable years beginning after

December 31, 1989.

(iv) Installment sales

In the case of any installment sale in a taxable year

beginning after December 31, 1989, adjusted current earnings

shall be computed as if the corporation did not use the

installment method. The preceding sentence shall not apply to

the applicable percentage (as determined under section 453A)

of the gain from any installment sale with respect to which

section 453A(a)(1) applies.

(E) Disallowance of loss on exchange of debt pools

No loss shall be recognized on the exchange of any pool of

debt obligations for another pool of debt obligations having

substantially the same effective interest rates and maturities.

(F) Depletion

(i) In general

The allowance for depletion with respect to any property

placed in service in a taxable year beginning after December

31, 1989, shall be cost depletion determined under section

611.

(ii) Exception for independent oil and gas producers and

royalty owners

In the case of any taxable year beginning after December

31, 1992, clause (i) (and subparagraph (C)(i)) shall not

apply to any deduction for depletion computed in accordance

with section 613A(c).

(G) Treatment of certain ownership changes

If -

(i) there is an ownership change (within the meaning of

section 382) in a taxable year beginning after 1989 with

respect to any corporation, and

(ii) there is a net unrealized built-in loss (within the

meaning of section 382(h)) with respect to such corporation,

then the adjusted basis of each asset of such corporation

(immediately after the ownership change) shall be its

proportionate share (determined on the basis of respective fair

market values) of the fair market value of the assets of such

corporation (determined under section 382(h)) immediately

before the ownership change.

(H) Adjusted basis

The adjusted basis of any property with respect to which an

adjustment under this paragraph applies shall be determined by

applying the treatment prescribed in this paragraph.

(I) Treatment of charitable contributions

Notwithstanding subparagraphs (B) and (C), no adjustment

related to the earnings and profits effects of any charitable

contribution shall be made in computing adjusted current

earnings.

(5) Other definitions

For purposes of paragraph (4) -

(A) Earnings and profits

The term "earnings and profits" means earnings and profits

computed for purposes of subchapter C.

(B) Treatment of alternative minimum taxable income

The treatment of any item for purposes of computing

alternative minimum taxable income shall be determined without

regard to this subsection.

(6) Exception for certain corporations

This subsection shall not apply to any S corporation, regulated

investment company, real estate investment trust, REMIC, or

FASIT.

-SOURCE-

(Added Pub. L. 99-514, title VII, Sec. 701(a), Oct. 22, 1986, 100

Stat. 2322; amended Pub. L. 100-203, title X, Secs. 10202(d),

10243(a), Dec. 22, 1987, 101 Stat. 1330-392, 1330-423; Pub. L.

100-647, title I, Secs. 1002(a)(12), 1007(b)(1)-(14)(A), (15)-(19),

title II, Secs. 2001(c)(3)(A), 2004(b)(2), (3), title V, Sec.

5041(b)(4), title VI, Secs. 6079(a)(1), 6303(a), Nov. 10, 1988, 102

Stat. 3355, 3428-3432, 3594, 3599, 3674, 3709, 3755; Pub. L.

101-239, title VII, Secs. 7205(b), 7611(a)-(f)(4), 7612(c)(1),

(d)(1), 7811(d)(3), 7815(e)(2), (4), Dec. 19, 1989, 103 Stat. 2335,

2371-2374, 2408, 2419; Pub. L. 101-508, title XI, Secs. 11103(b),

11301(b), 11531(a), (b)(1), 11704(a)(1), 11801(a)(3),

(c)(2)(A)-(C), (9)(G), 11812(b)(4), Nov. 5, 1990, 104 Stat.

1388-406, 1388-449, 1388-488, 1388-490, 1388-518, 1388-520,

1388-522, 1388-523, 1388-526, 1388-535; Pub. L. 102-486, title XIX,

Sec. 1915(a)(2), (b)(2), (c)(1), (2), Oct. 24, 1992, 106 Stat.

3023, 3024; Pub. L. 103-66, title XIII, Secs. 13115(a), 13171(b),

13227(c), Aug. 10, 1993, 107 Stat. 432, 454, 493; Pub. L. 104-188,

title I, Secs. 1601(b)(2)(B), (C), 1621(b)(2), 1702(c)(1),

(e)(1)(A), (g)(4), (h)(12), 1704(t)(1), (48), Aug. 20, 1996, 110

Stat. 1832, 1833, 1867, 1869, 1870, 1873, 1874, 1887, 1889; Pub. L.

105-34, title III, Sec. 312(d)(1), title IV, Secs. 402, 403(a),

title XII, Sec. 1212(a), Aug. 5, 1997, 111 Stat. 839, 844, 1000;

Pub. L. 105-277, div. J, title IV, Sec. 4006(c)(2), Oct. 21, 1998,

112 Stat. 2681-912; Pub. L. 106-519, Sec. 4(1), Nov. 15, 2000, 114

Stat. 2432; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 314(d)],

Dec. 21, 2000, 114 Stat. 2763, 2763A-643; Pub. L. 107-147, title I,

Sec. 102(c)(1), title IV, Sec. 417(5), Mar. 9, 2002, 116 Stat. 26,

56.)

-REFTEXT-

REFERENCES IN TEXT

Section 201 of the Tax Reform Act of 1986, referred to in

subsecs. (a)(1)(C) and (g)(4)(A)(ii), is section 201 of Pub. L.

99-514, which amended sections 46, 167, 168, 178, 179, 280F, 291,

312, 465, 467, 514, 751, 1245, 4162, 6111, and 7701 of this title.

Sections 203, 204, and 251(d) of such Act, referred to in subsec.

(a)(1)(C), are sections 203, 204, and 251(d) of the Tax Reform Act

of 1986, Pub. L. 99-514. Sections 203 and 204 are set out as notes

under section 168 of this title. Section 251(d) is set out as a

note under section 46 of this title.

The date of the enactment of the Tax Reform Act of 1986, referred

to in subsec. (g)(4)(A)(iii), is the date of enactment of Pub. L.

99-514, which was approved Oct. 22, 1986.

Sections 921 and 927, referred to in subsec. (g)(4)(C), were

repealed by Pub. L. 106-519, Sec. 2, Nov. 15, 2000, 114 Stat. 2423.

-MISC1-

PRIOR PROVISIONS

A prior section 56, added Pub. L. 91-172, title III, Sec. 301(a),

Dec. 30, 1969, 83 Stat. 580; amended Pub. L. 91-614, title V, Sec.

501(a), Dec. 31, 1970, 84 Stat. 1846; Pub. L. 92-178, title VI,

Sec. 601(c)(4), (5), Dec. 10, 1971, 85 Stat. 558; Pub. L. 93-406,

title II, Secs. 2001(g)(2)(D), 2002(g)(4), 2005(c)(7), Sept. 2,

1974, 88 Stat. 957, 968, 991; Pub. L. 94-12, title II, Secs.

203(b)(2), (3), 208(d)(2), (3), Mar. 29, 1975, 89 Stat. 30, 35;

Pub. L. 94-455, title III, Sec. 301(a), (b), (c)(4)(B), Oct. 4,

1976, 90 Stat. 1549, 1552; Pub. L. 95-30, title II, Sec. 202(d)(2),

May 23, 1977, 91 Stat. 148; Pub. L. 95-600, title I, Sec. 141(d),

Nov. 6, 1978, 92 Stat. 2794; Pub. L. 95-618, title I, Sec.

101(b)(2), Nov. 9, 1978, 92 Stat. 3179; Pub. L. 96-222, title I,

Sec. 101(a)(7)(L)(iii)(IV), Apr. 1, 1980, 94 Stat. 200; Pub. L.

97-34, title III, Sec. 331(c)(2), Aug. 13, 1981, 95 Stat. 293; Pub.

L. 97-248, title II, Sec. 201(d)(1), formerly Sec. 201(c)(1), Sept.

3, 1982, 96 Stat. 419, renumbered Sec. 201(d)(1), Pub. L. 97-448,

title III, Sec. 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub.

L. 98-369, div. A, title IV, Sec. 474(r)(1), July 18, 1984, 98

Stat. 839; Pub. L. 99-514, title XI, Sec. 1171(b)(3), Oct. 22,

1986, 100 Stat. 2513, related to a corporate minimum tax, prior to

the general revision of this part by Pub. L. 99-514, Sec. 701(a).

AMENDMENTS

2002 - Subsec. (a)(1)(A)(ii). Pub. L. 107-147, Sec. 417(5),

substituted "such section 1250" for "such 1250" in concluding

provisions.

Subsec. (d)(1)(A). Pub. L. 107-147, Sec. 102(c)(1), amended

subpar. (A) generally. Prior to amendment, subpar. (A) read as

follows: "the amount of such deduction shall not exceed 90 percent

of alternate minimum taxable income determined without regard to

such deduction, and".

2000 - Subsec. (a)(1)(A)(ii). Pub. L. 106-554 inserted "(and the

straight line method shall be used for such 1250 property)" before

"or to any other property" in concluding provisions.

Subsec. (g)(4)(B)(i). Pub. L. 106-519 inserted "or under section

114" before the period at end of first sentence in concluding

provisions.

1998 - Subsec. (a)(3). Pub. L. 105-277 substituted "section

460(b)(1)" for "section 460(b)(2)" and "section 460(b)(3)" for

"section 460(b)(4)".

1997 - Subsec. (a)(1)(A)(i). Pub. L. 105-34, Sec. 402(a),

inserted at end "In the case of property placed in service after

December 31, 1998, the preceding sentence shall not apply but

clause (ii) shall continue to apply."

Subsec. (a)(5). Pub. L. 105-34, Sec. 402(b), inserted at end "In

the case of such a facility placed in service after December 31,

1998, such deduction shall be determined under section 168 using

the straight line method."

Subsec. (a)(6) to (8). Pub. L. 105-34, Sec. 403(a), redesignated

pars. (7) and (8) as (6) and (7), respectively, and struck out

former par. (6) which read as follows:

"(6) Installment sales of certain property. - In the case of any

disposition after March 1, 1986, of any property described in

section 1221(1), income from such disposition shall be determined

without regard to the installment method under section 453. This

paragraph shall not apply to any disposition with respect to which

an election is in effect under section 453(l)(2)(B)."

Subsec. (e)(1)(A), (3)(B)(i). Pub. L. 105-34, Sec. 312(d)(1),

substituted "section 121" for "section 1034".

Subsec. (g)(4)(B)(i). Pub. L. 105-34, Sec. 1212(a), inserted at

end of concluding provisions "In the case of any insurance company

taxable under section 831(b), this clause shall not apply to any

amount not described in section 834(b)."

1996 - Subsec. (b)(3). Pub. L. 104-188, Sec. 1702(h)(12),

provided that the amendment made by section 11801(c)(9)(G)(ii) of

Pub. L. 101-508 shall be applied as if it struck "Section

422A(c)(2)" and inserted "Section 422(c)(2)". See 1990 Amendment

note below.

Subsec. (d)(1)(B)(ii). Pub. L. 101-508, Sec. 1702(e)(1)(A),

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

follows: "in the case of taxable years beginning after December 31,

1986, section 172(b)(2) shall be applied by substituting '90

percent of alternative minimum taxable income determined without

regard to the alternative tax net operating loss deduction' for

'taxable income' each place it appears."

Subsec. (g)(1), (2)(A). Pub. L. 104-188, Sec. 1704(t)(48),

provided that section 11801(c)(2)(B) of Pub. L. 101-508 shall be

applied as if "section 56(g)" appeared instead of "section 59(g)".

See 1990 Amendment note below.

Subsec. (g)(4)(C)(ii)(I). Pub. L. 104-188, Sec. 1601(b)(2)(B),

inserted "30A," before "936" and substituted ", (i), and (j)" for

"and (i)".

Subsec. (g)(4)(C)(ii)(II). Pub. L. 104-188, Sec. 1704(t)(1),

substituted "of subclause" for "of the subclause".

Subsec. (g)(4)(C)(iii)(VI). Pub. L. 104-188, Sec. 1601(b)(2)(C),

added subcl. (VI).

Subsec. (g)(4)(D)(iii). Pub. L. 104-188, Sec. 1702(g)(4),

inserted ", but only with respect to taxable years beginning after

December 31, 1989" before period at end.

Subsec. (g)(4)(H) to (J). Pub. L. 104-188, Sec. 1702(c)(1),

redesignated subpars. (I) and (J) as (H) and (I), respectively.

Subsec. (g)(6). Pub. L. 104-188, Sec. 1621(b)(2), substituted

"REMIC, or FASIT" for "or REMIC".

1993 - Subsec. (g)(4)(A)(i). Pub. L. 103-66, Sec. 13115(a),

inserted at end "The preceding sentence shall not apply to any

property placed in service after December 31, 1993, and the

depreciation deduction with respect to such property shall be

determined under the rules of subsection (a)(1)(A)."

Subsec. (g)(4)(C)(ii)(I). Pub. L. 103-66, Sec. 13227(c)(1),

substituted "sections 936 (including subsections (a)(4) and (i)

thereof) and 921" for "sections 936 and 921".

Subsec. (g)(4)(C)(iii)(IV), (V). Pub. L. 103-66, Sec.

13227(c)(2), added subcls. (IV) and (V).

Subsec. (g)(4)(J). Pub. L. 103-66, Sec. 13171(b), added subpar.

(J).

1992 - Subsec. (d)(1)(A). Pub. L. 102-486, Sec. 1915(c)(2),

amended subpar. (A) generally. Prior to amendment, subpar. (A) read

as follows: "the amount of such deduction shall not exceed the

excess (if any) of -

"(i) 90 percent of alternative minimum taxable income

determined without regard to such deduction and the deduction

under subsection (h), over

"(ii) the deduction under subsection (h), and".

Subsec. (g)(4)(D)(i). Pub. L. 102-486, Sec. 1915(b)(2), inserted

at end "In the case of a taxpayer other than an integrated oil

company (as defined in section 291(b)(4)), in the case of any oil

or gas well, this clause shall not apply in the case of amounts

paid or incurred in taxable years beginning after December 31,

1992."

Subsec. (g)(4)(F). Pub. L. 102-486, Sec. 1915(a)(2), amended

subpar. (F) generally. Prior to amendment, subpar. (F) read as

follows: "The allowance for depletion with respect to any property

placed in service in a taxable year beginning after 1989 shall be

cost depletion determined under section 611."

Subsec. (h). Pub. L. 102-486, Sec. 1915(c)(1), struck out subsec.

(h) which related to adjustment based on energy preferences.

1990 - Subsec. (a)(1)(D). Pub. L. 101-508, Sec. 11812(b)(4),

substituted "section 168(i)(10)" for "section 167(l)(3)(A)".

Subsec. (b)(1)(F). Pub. L. 101-508, Sec. 11103(b), added subpar.

(F).

Subsec. (b)(3). Pub. L. 101-508, Sec. 11801(c)(9)(G)(i),

substituted "section 422" for "section 422A".

Pub. L. 101-508, Sec. 11801(c)(9)(G)(ii), which directed the

substitution of "section 422(c)(2)" for "section 422A(c)(2)", was

executed by substituting "Section 422(c)(2)" for "Section

422A(c)(2)". See 1996 Amendment note above.

Subsec. (c)(1). Pub. L. 101-508, Sec. 11801(c)(2)(A), substituted

heading for one which read: "Adjustment for book income or adjusted

current earnings" and amended text generally. Prior to amendment,

text read as follows:

"(A) Book income adjustment. - For taxable years beginning in

1987, 1988, and 1989, alternative minimum taxable income shall be

adjusted as provided under subsection (f).

"(B) Adjusted current earnings. - For taxable years beginning

after 1989, alternative minimum taxable income shall be adjusted as

provided under subsection (g)."

Subsec. (d)(1)(A). Pub. L. 101-508, Sec. 11531(b)(1), amended

subpar. (A) generally. Prior to amendment, subpar. (A) read as

follows: "the amount of such deduction shall not exceed 90 percent

of alternative minimum taxable income determined without regard to

such deduction, and".

Subsec. (f). Pub. L. 101-508, Sec. 11801(a)(3), struck out

subsec. (f) which related to adjustments for book income of

corporations with respect to minimum taxable income, adjusted net

book income, adjustments for certain taxes, special rules for

related corporations for consolidated returns, treatment of

dividends, statements covering different periods, special rule for

cooperatives, treatment and limitation of taxes on dividends from

936 corporations, rules for Alaska native corporations, special

rules for life insurance companies, exclusion of certain income

from transfer of stock for debt, secretarial authority to adjust

items, applicable financial statements, earnings and profits used,

special rules for more than one statement and exception for certain

corporations.

Subsec. (g)(1), (2)(A). Pub. L. 101-508, Sec. 11801(c)(2)(B),

which directed that pars. (1) and (2) "of section 59(g) are each

amended by striking 'beginning after 1989' ", was executed to pars.

(1) and (2)(A) of subsec. (g) of this section after "any taxable

year". See 1996 Amendment note above.

Subsec. (g)(4)(C)(iii). Pub. L. 101-508, Sec. 11801(c)(2)(C),

substituted heading for one which read: "Special rule for dividends

from section 936 companies" and amended text generally. Prior to

amendment, text read as follows: "In the case of any dividend

received from a corporation eligible for the credit provided by

section 936, rules similar to the rules of subparagraph (F) of

subsection (f)(1) shall apply, except that '75 percent' shall be

substituted for '50 percent' in clause (i) thereof."

Subsec. (g)(4)(D)(ii). Pub. L. 101-508, Sec. 11704(a)(1),

substituted "years" for "year".

Subsec. (g)(4)(F) to (H). Pub. L. 101-508, Sec. 11301(b),

redesignated subpars. (G) and (H) as (F) and (G), respectively, and

struck out former subpar. (F) which provided that acquisition

expenses for life insurance companies be capitalized and amortized

in accordance with the treatment generally required under generally

accepted accounting principles as if this subparagraph applied to

all taxable years.

Subsec. (h). Pub. L. 101-508, Sec. 11531(a), added subsec. (h).

1989 - Subsec. (a)(3). Pub. L. 101-239, Sec. 7815(e)(2)(B),

substituted "The first sentence of this paragraph shall not" for

"The preceding sentence shall not".

Pub. L. 101-239, Sec. 7815(e)(2)(A), made clarifying amendment to

directory language of Pub. L. 100-647, Sec. 5041(b)(4), see 1988

Amendment note below.

Pub. L. 101-239, Sec. 7612(c)(1), struck out "with respect to

which the requirements of clauses (i) and (ii) of section

460(e)(1)(B) are met" after "section 460(e)(6))".

Subsec. (b)(2)(D). Pub. L. 101-239, Sec. 7612(d)(1), added

subpar. (D).

Subsec. (b)(3). Pub. L. 101-239, Sec. 7811(d)(3), inserted after

first sentence "Section 422A(c)(2) shall apply in any case where

the disposition and the inclusion for purposes of this part are

within the same taxable year and such section shall not apply in

any other case." and substituted "this paragraph" for "the

preceding sentence" in last sentence.

Subsec. (g)(4)(A)(i). Pub. L. 101-239, Sec. 7611(a)(1)(A),

amended cl. (i) generally. Prior to amendment cl. (i) read as

follows: "The depreciation deduction with respect to any property

placed in service in a taxable year beginning after 1989 shall be

determined under whichever of the following methods yields

deductions with a smaller present value:

"(I) The alternative system of section 168(g), or

"(II) The method used for book purposes."

Subsec. (g)(4)(A)(iii). Pub. L. 101-239, Sec. 7611(a)(2),

inserted "and which is placed in service in a taxable year

beginning before 1990" after "thereof) applies".

Subsec. (g)(4)(A)(v) to (vii). Pub. L. 101-239, Sec.

7611(a)(1)(B), redesignated cl. (vii) as (v), and struck out former

cl. (v), which related to use of slower method if used for book

purposes, and cl. (vi), which related to election to have

cumulative limitation.

Subsec. (g)(4)(B)(i). Pub. L. 101-239, Sec. 7611(f)(2), inserted

at end "The preceding sentence shall not apply in the case of any

amount excluded from gross income under section 108 (or the

corresponding provisions of prior law)."

Subsec. (g)(4)(B)(iii). Pub. L. 101-239, Sec. 7611(f)(3),

repealed cl. (iii) which read as follows: "In the case of any

annuity contract, the income on such contract (as determined under

section 72(u)(2)) shall be treated as includible in gross income

for such year. The preceding sentence shall not apply to any

annuity contract which is held under a plan described in section

403(a) or which is described in section 72(u)(3)(C)."

Subsec. (g)(4)(C)(ii). Pub. L. 101-239, Sec. 7611(d), amended cl.

(ii) generally. Prior to amendment, cl. (ii) read as follows:

"Clause (i) shall not apply to any deduction allowable under

section 243 or 245 for a 100-percent dividend -

"(I) if the corporation receiving such dividend and the

corporation paying such dividend could not be members of the same

affiliated group under section 1504 by reason of section 1504(b),

"(II) but only to the extent such dividend is attributable to

income of the paying corporation which is subject to tax under

this chapter (determined after the application of sections 936

and 921).

For purposes of the preceding sentence, the term '100 percent

dividend' means any dividend if the percentage used for purposes of

determining the amount allowable as a deduction under section 243

or 245 with respect to such dividend is 100 percent."

Subsec. (g)(4)(C)(iv). Pub. L. 101-239, Sec. 7611(e), added cl.

(iv).

Subsec. (g)(4)(D). Pub. L. 101-239, Sec. 7611(b), amended subpar.

(D) generally, in cl. (i), substituting provisions directing that

adjustments in section 312(n)(2)(A) be applied, for provisions

directing adjustments in section 312(n) be applied, with certain

exceptions, in cl. (ii), substituting provisions directing that

sections 173 and 248 not apply to expenditures paid or incurred in

taxable years beginning after December 31, 1989, for material

relating to special rule for intangible drilling costs and mineral

exploration and development costs, and adding cls. (iii) and (iv).

Subsec. (g)(4)(D)(i)(IV), (V). Pub. L. 101-239, Sec. 7815(e)(4),

added subcl. (IV) relating to inapplicability of pars. (6) to (8)

and struck out former subcls. (IV) and (V), which read as follows:

"(IV) paragraph (6) shall apply only to contracts entered into on

or after March 1, 1986, and

"(V) paragraphs (7) and (8) shall not apply."

Subsec. (g)(4)(G). Pub. L. 101-239, Sec. 7611(c), amended subpar.

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

"The allowances for depletion with respect to any property placed

in service in a taxable year beginning after 1989, shall be

determined under whichever of the following methods yields

deductions with a smaller present value:

"(i) cost depletion determined under section 611, or

"(ii) the method used for book purposes."

Subsec. (g)(4)(H). Pub. L. 101-239, Sec. 7205(b), added cl. (ii)

and concluding provision and struck out former cl. (ii) and

concluding provision which read as follows:

"(ii)(I) the aggregate adjusted bases of the assets of such

corporation (immediately after the change), exceed

"(II) the value of the stock of such corporation (as determined

for purposes of section 382), properly adjusted for liabilities and

other relevant items,

then the adjusted basis of each asset of such corporation (as of

such time) shall be its proportionate share (determined on the

basis of respective fair market values) of the amount referred to

in clause (ii)(II)."

Subsec. (g)(4)(H)(i). Pub. L. 101-239, Sec. 7611(f)(1),

substituted "in a taxable year beginning after 1989" for "after the

date of the enactment of the Tax Reform Act of 1986".

Subsec. (g)(5)(A). Pub. L. 101-239, Sec. 7611(f)(4), redesignated

subpar. (B) as (A) and struck out former subpar. (A) which defined

"book purposes".

Subsec. (g)(5)(B). Pub. L. 101-239, Sec. 7611(f)(4), redesignated

subpar. (D) as (B). Former subpar. (B) redesignated (A).

Subsec. (g)(5)(C). Pub. L. 101-239, Sec. 7611(f)(4), struck out

subpar. (C) which read as follows: "Present value. - Present value

shall be determined as of the time the property is placed in

service (or, if later, as of the beginning of the first taxable

year beginning after 1989) and under regulations prescribed by the

Secretary."

Subsec. (g)(5)(D). Pub. L. 101-239, Sec. 7611(f)(4), redesignated

subpar. (D) as (B).

1988 - Subsec. (a)(1)(A)(i). Pub. L. 100-647, Sec. 1007(b)(15),

substituted "personal" for "real" in heading.

Subsec. (a)(1)(C)(i). Pub. L. 100-647, Sec. 1002(a)(12), inserted

"by reason of section 203, 204, or 251(d) of such Act" after "do

not apply".

Subsec. (a)(3). Pub. L. 100-647, Sec. 5041(b)(4), as amended by

Pub. L. 101-239, Sec. 7815(e)(2)(A), inserted at end "The preceding

sentence shall not apply to any home construction contract (as

defined in section 460(e)(6)) with respect to which the

requirements of clauses (i) and (ii) of section 460(e)(1)(B) are

met."

Pub. L. 100-647, Sec. 1007(b)(1), inserted at end "For purposes

of the preceding sentence, in the case of a contract described in

section 460(e)(1), the percentage of the contract completed shall

be determined under section 460(b)(2) by using the simplified

procedures for allocation of costs prescribed under section

460(b)(4)."

Subsec. (a)(8). Pub. L. 100-647, Sec. 1007(b)(19), added par.

(8).

Subsec. (b)(1). Pub. L. 100-647, Sec. 1007(b)(16), struck out

"itemized" after "Limitation on" in heading.

Subsec. (b)(1)(C)(ii). Pub. L. 100-647, Sec. 2004(b)(2),

substituted "163(h)(5)" for "163(h)(6)".

Subsec. (b)(1)(C)(iii). Pub. L. 100-647, Sec. 1007(b)(4),

substituted "specified private activity bond" for "specified

activity bond" before "under", and "57(a)(5)(B)" for "56(a)(5)(B)".

Subsec. (b)(1)(C)(iv), (v). Pub. L. 100-647, Sec. 1007(b)(3),

added cls. (iv) and (v).

Subsec. (b)(1)(E). Pub. L. 100-647, Sec. 1007(b)(2), substituted

"and deduction for personal exemptions not allowed" for "not

allowed" in heading and amended text generally. Prior to amendment,

text read as follows: "The standard deduction provided in section

63(c) shall not be allowed."

Subsec. (b)(3). Pub. L. 100-647, Sec. 1007(b)(14)(A), added par.

(3).

Subsec. (c)(1). Pub. L. 100-647, Sec. 1007(b)(13)(A), substituted

"adjusted current earnings" for "adjusted earnings and profits" in

heading.

Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 1007(b)(13)(B),

substituted "Adjusted current earnings" for "Adjusted earnings and

profits" in heading.

Subsec. (d)(2)(A). Pub. L. 100-647, Sec. 1007(b)(5), struck out

"(other than subsection (a)(6) thereof)" after "for such year" in

cl. (ii) and inserted sentence at end providing that an item of tax

preference shall be taken into account under clause (ii).

Subsec. (e)(1). Pub. L. 100-647, Sec. 2004(b)(3)(A), substituted

"improving" for "rehabilitating" in introductory text.

Pub. L. 100-647, Sec. 1007(b)(6)(A)(i), inserted "qualified

residence interest (as defined in section 163(h)(3)) and is" after

"interest which is" in introductory text.

Subsec. (e)(1)(A). Pub. L. 100-647, Sec. 2004(b)(3)(B), struck

out "or is paid" after "accrues".

Subsec. (e)(1)(B). Pub. L. 100-647, Sec. 1007(b)(6)(A)(ii),

substituted "section 163(h)(4)" for "section 163(h)(3)".

Subsec. (e)(3). Pub. L. 100-647, Sec. 1007(b)(6)(B), substituted

"interest which is qualified residence interest (as defined in

section 163(h)(3)) and is paid or accrued" for "interest paid or

accrued".

Subsec. (f)(2)(B). Pub. L. 100-647, Sec. 2001(c)(3)(A), inserted

at end "No adjustment shall be made under this subparagraph for the

tax imposed by section 59A."

Pub. L. 100-647, Sec. 1007(b)(7), inserted "(otherwise eligible

for the credit provided by section 901 without regard to section

901(j))" after "any such taxes".

Subsec. (f)(2)(F). Pub. L. 100-647, Sec. 1007(b)(11)(A),

substituted "Treatment of taxes on dividends from 936 corporations"

for "Treatment of dividends from 936 corporations" in heading and

amended text generally, substituting cls. (i) to (iii) for former

cls. (i) and (ii).

Subsec. (f)(2)(I), (J). Pub. L. 100-647, Sec. 6303(a), added

subpar. (I) and redesignated former subpar. (I) as (J).

Subsec. (f)(3)(A)(iii). Pub. L. 100-647, Sec. 1007(b)(8),

inserted "for a substantial nontax purpose" after "an income

statement".

Subsec. (f)(3)(B). Pub. L. 100-647, Sec. 1007(b)(9), substituted

"this subsection" for "paragraph (3)(A)" in penultimate sentence.

Subsec. (f)(3)(C). Pub. L. 100-647, Sec. 1007(b)(10), inserted at

end "If the taxpayer has 2 or more statements described in the

clause (or subclause) with the lowest number designation, the

applicable financial statement shall be the one of such statements

specified in regulations."

Subsec. (g)(4)(A)(vi), (vii). Pub. L. 100-647, Sec. 1007(b)(17),

added cls. (vi) and (vii).

Subsec. (g)(4)(B)(iii). Pub. L. 100-647, Sec. 6079(a)(1), amended

last sentence generally, inserting "which is" after "any annuity

contract" and "or which is described in section 72(u)(3)(C)" after

"in section 403(a)".

Pub. L. 100-647, Sec. 1007(b)(12), inserted at end "The preceding

sentence shall not apply to any annuity contract held under a plan

described in section 403(a)."

Subsec. (g)(4)(C)(iii). Pub. L. 100-647, Sec. 1007(b)(11)(B),

substituted "clause (i)" for "clause (ii)(I)".

Subsec. (g)(4)(I). Pub. L. 100-647, Sec. 1007(b)(18), added

subpar. (I).

1987 - Subsec. (a)(6). Pub. L. 100-203, Sec. 10202(d), amended

par. (6) generally. Prior to amendment, par. (6) read as follows:

"In the case of any -

"(A) disposition after March 1, 1986, of property described in

section 1221(1), or

"(B) other disposition if an obligation arising from such

disposition would be an applicable installment obligation (as

defined in section 453C(e)) to which section 453C applies,

income from such disposition shall be determined without regard to

the installment method under section 453 or 453A and all payments

to be received for the disposition shall be deemed received in the

taxable year of the disposition. This paragraph shall not apply to

any disposition with respect to which an election is in effect

under section 453C(e)(4)."

Subsec. (f)(2)(H), (I). Pub. L. 100-203, Sec. 10243(a), added

subpar. (H) and redesignated former subpar. (H) as (I).

EFFECTIVE DATE OF 2002 AMENDMENT

Pub. L. 107-147, title I, Sec. 102(c)(2), Mar. 9, 2002, 116 Stat.

26, provided that: "The amendment made by this subsection [amending

this section] shall apply to taxable years ending before January 1,

2003."

EFFECTIVE DATE OF 2000 AMENDMENTS

Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 314(g)], Dec. 21,

2000, 114 Stat. 2763, 2763A-643, provided that: "The amendments

made by this section [amending this section and sections 403, 414,

415, 3405, 6211 and 7436 of this title and provisions set out as a

note under section 1 of this title] shall take effect as if

included in the provisions of the Taxpayer Relief [Act] of 1997

[Pub. L. 105-34] to which they relate."

Amendment by Pub. L. 106-519 applicable to transactions after

Sept. 30, 2000, with special rules relating to existing foreign

sales corporations, see section 5 of Pub. L. 106-519, set out as an

Effective Date note under section 941 of this title.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by section 312(d)(1) of Pub. L. 105-34 applicable to

sales and exchanges after May 6, 1997, with certain exceptions, see

section 312(d) of Pub. L. 105-34, set out as a note under section

121 of this title.

Section 403(b) of Pub. L. 105-34 provided that:

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

this section] shall apply to dispositions in taxable years

beginning after December 31, 1987.

"(2) Special rule for 1987. - In the case of taxable years

beginning in 1987, the last sentence of section 56(a)(6) of the

Internal Revenue Code of 1986 (as in effect for such taxable years)

shall be applied by inserting 'or in the case of a taxpayer using

the cash receipts and disbursements method of accounting, any

disposition described in section 453C(e)(1)(B)(ii)' after 'section

453C(e)(4)'."

Section 1212(b) of Pub. L. 105-34 provided that: "The amendment

made by subsection (a) [amending this section] shall apply to

taxable years beginning after December 31, 1997."

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by section 1601(b)(2)(B), (C) of Pub. L. 104-188

applicable to taxable years beginning after Dec. 31, 1995, except

as otherwise provided, see section 1601(c) of Pub. L. 104-188, set

out as an Effective Date note under section 30A of this title.

Amendment by section 1621(b)(2) 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.

Amendment by section 1702(c)(1), (e)(1)(A), (g)(4), and (h)(12)

of Pub. L. 104-188 effective, except as otherwise expressly

provided, as if included in the provision of the Revenue

Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which

such amendment relates, see section 1702(i) of Pub. L. 104-188, set

out as a note under section 38 of this title.

EFFECTIVE DATE OF 1993 AMENDMENT

Section 13115(b) of Pub. L. 103-66 provided that:

"(1) In general. - Except as provided in paragraph (2), the

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

to property placed in service after December 31, 1993.

"(2) Coordination with transitional rules. - The amendments made

by this section shall not apply to any property to which paragraph

(1) of section 56(a) of the Internal Revenue Code of 1986 does not

apply by reason of subparagraph (C)(i) thereof."

Amendment by section 13171(b) of Pub. L. 103-66 applicable to

contributions made after June 30, 1992, except that in case of any

contribution of capital gain property which is not tangible

personal property, such amendment applicable only if the

contribution is made after Dec. 31, 1992, see section 13171(d) of

Pub. L. 103-66, set out as a note under section 53 of this title.

Section 13227(f) of Pub. L. 103-66 provided that: "The amendments

made by this section [amending this section and sections 904, 936,

and 7652 of this title] shall apply to taxable years beginning

after December 31, 1993; except that the amendment made by

subsection (e) [amending section 7652 of this title] shall take

effect on October 1, 1993."

EFFECTIVE DATE OF 1992 AMENDMENT

Section 1915(d) of Pub. L. 102-486 provided that: "The amendments

made by this section [amending this section and sections 57, 59,

and 59A of this title] shall apply to taxable years beginning after

December 31, 1992."

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by section 11103(b) of Pub. L. 101-508 applicable to

taxable years beginning after Dec. 31, 1990, see section 11103(e)

of Pub. L. 101-508, set out as a note under section 1 of this

title.

Section 11301(d)(2) of Pub. L. 101-508 provided that:

"(A) In general. - The amendment made by subsection (b) [amending

this section] shall apply to taxable years beginning on or after

September 30, 1990, except that, in the case of a small insurance

company, such amendment shall apply to taxable years beginning

after December 31, 1989. For purposes of this paragraph, the term

'small insurance company' means any insurance company which meets

the requirements of section 806(a)(3) of the Internal Revenue Code

of 1986; except that paragraph (2) of section 806(c) of such Code

shall not apply.

"(B) Special rules for year which includes september 30, 1990. -

In the case of any taxable year which includes September 30, 1990,

the amount of acquisition expenses which is required to be

capitalized under section 56(g)(4)(F) of the Internal Revenue Code

of 1986 (as in effect before the amendment made by subsection (b))

by a company which is not a small insurance company shall be the

amount which bears the same ratio to the amount which (but for this

subparagraph) would be so required to be capitalized as the number

of days in such taxable year before September 30, 1990, bears to

the total number of days in such taxable year. A similar reduction

shall be made in the amount amortized for such taxable year under

such section 56(g)(4)(F)."

Section 11531(c) of Pub. L. 101-508 provided that: "The

amendments made by this section [amending this section and sections

59 and 59A of this title] shall apply to taxable years beginning

after December 31, 1990."

Section 11704(b) of Pub. L. 101-508 provided that: "The

amendments made by this section [amending this section, sections

172, 351, 413, 461, 469, 597, 857, 860D, 860G, 892, 927, 936, 1017,

1245, 1441, 2056A, 2642, 3231, 4091, 4093, 5061, 6013, 6038A,

6039D, 6045, 6323, 6332, 6655, 7519, 7522, 7608, and 7701 of this

title, and provisions set out as a note under section 231n of Title

45, Railroads] shall take effect on the date of the enactment of

this Act."

Amendment by section 11812(b)(4) 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.