TITLE 26--INTERNAL REVENUE CODE
Subtitle A--Income Taxes
CHAPTER 1--NORMAL TAXES AND SURTAXES
Subchapter D--Deferred Compensation, Etc.
PART I--PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A--General Rule
Sec. 409. Qualifications for tax credit employee stock ownership
plans
(a) Tax credit employee stock ownership plan defined
Except as otherwise provided in this title, for purposes of this
title, the term ``tax credit employee stock ownership plan'' means a
defined contribution plan which--
(1) meets the requirements of section 401(a),
(2) is designed to invest primarily in employer securities, and
(3) meets the requirements of subsections (b), (c), (d), (e),
(f), (g), (h), and (o) of this section.
(b) Required allocation of employer securities
(1) In general
A plan meets the requirements of this subsection if--
(A) the plan provides for the allocation for the plan year
of all employer securities transferred to it or purchased by it
(because of the requirements of section 41(c)(1)(B)) \1\ to the
accounts of all participants who are entitled to share in such
allocation, and
---------------------------------------------------------------------------
\1\ See References in Text note below.
---------------------------------------------------------------------------
(B) for the plan year the allocation to each participant so
entitled is an amount which bears substantially the same
proportion to the amount of all such securities allocated to all
such participants in the plan for that year as the amount of
compensation paid to such participant during that year bears to
the compensation paid to all such participants during that year.
(2) Compensation in excess of $100,000 disregarded
For purposes of paragraph (1), compensation of any participant
in excess of the first $100,000 per year shall be disregarded.
(3) Determination of compensation
For purposes of this subsection, the amount of compensation paid
to a participant for any period is the amount of such participant's
compensation (within the meaning of section 415(c)(3)) for such
period.
(4) Suspension of allocation in certain cases
Notwithstanding paragraph (1), the allocation to the account of
any participant which is attributable to the basic employee plan
credit or the credit allowed under section 41 \1\ (relating to the
employee stock ownership credit) may be extended over whatever
period may be necessary to comply with the requirements of section
415.
(c) Participants must have nonforfeitable rights
A plan meets the requirements of this subsection only if it provides
that each participant has a nonforfeitable right to any employer
security allocated to his account.
(d) Employer securities must stay in the plan
A plan meets the requirements of this subsection only if it provides
that no employer security allocated to a participant's account under
subsection (b) (or allocated to a participant's account in connection
with matched employer and employee contributions) may be distributed
from that account before the end of the 84th month beginning after the
month in which the security is allocated to the account. To the extent
provided in the plan, the preceding sentence shall not apply in the case
of--
(1) death, disability, separation from service, or termination
of the plan;
(2) a transfer of a participant to the employment of an
acquiring employer from the employment of the selling corporation in
the case of a sale to the acquiring corporation of substantially all
of the assets used by the selling corporation in a trade or business
conducted by the selling corporation, or
(3) with respect to the stock of a selling corporation, a
disposition of such selling corporation's interest in a subsidiary
when the participant continues employment with such subsidiary.
This subsection shall not apply to any distribution required under
section 401(a)(9) or to any distribution or reinvestment required under
section 401(a)(28).
(e) Voting rights
(1) In general
A plan meets the requirements of this subsection if it meets the
requirements of paragraph (2) or (3), whichever is applicable.
(2) Requirements where employer has a registration-type
class of securities
If the employer has a registration-type class of securities, the
plan meets the requirements of this paragraph only if each
participant or beneficiary in the plan is entitled to direct the
plan as to the manner in which securities of the employer which are
entitled to vote and are allocated to the account of such
participant or beneficiary are to be voted.
(3) Requirement for other employers
If the employer does not have a registration-type class of
securities, the plan meets the requirements of this paragraph only
if each participant or beneficiary in the plan is entitled to direct
the plan as to the manner in which voting rights under securities of
the employer which are allocated to the account of such participant
or beneficiary are to be exercised with respect to any corporate
matter which involves the voting of such shares with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale
of substantially all assets of a trade or business, or such similar
transaction as the Secretary may prescribe in regulations.
(4) Registration-type class of securities defined
For purposes of this subsection, the term, ``registration-type
class of securities'' means--
(A) a class of securities required to be registered under
section 12 of the Securities Exchange Act of 1934, and
(B) a class of securities which would be required to be so
registered except for the exemption from registration provided
in subsection (g)(2)(H) of such section 12.
(5) 1 vote per participant
A plan meets the requirements of paragraph (3) with respect to
an issue if--
(A) the plan permits each participant 1 vote with respect to
such issue, and
(B) the trustee votes the shares held by the plan in the
proportion determined after application of subparagraph (A).
(f) Plan must be established before employer's due date
(1) In general
A plan meets the requirements of this subsection only if it is
established on or before the due date (including any extension of
such date) for the filing of the employer's tax return for the first
taxable year of the employer for which an employee plan credit is
claimed by the employer with respect to the plan.
(2) Special rule for first year
A plan which otherwise meets the requirements of this section
shall not be considered to have failed to meet the requirements of
section 401(a) merely because it was not established by the close of
the first taxable year of the employer for which an employee plan
credit is claimed by the employer with respect to the plan.
(g) Transferred amounts must stay in plan even though investment credit
is redetermined or recaptured
A plan meets the requirement of this subsection only if it provides
that amounts which are transferred to the plan (because of the
requirements of section 48(n)(1) or 41(c)(1)(B)) \2\ shall remain in the
plan (and, if allocated under the plan, shall remain so allocated) even
though part or all of the employee plan credit or the credit allowed
under section 41 \2\ (relating to employee stock ownership credit) is
recaptured or redetermined. For purposes of the preceding sentence, the
references to section 48(n)(1) \2\ and the employee plan credit shall
refer to such section and credit as in effect before the enactment of
the Tax Reform Act of 1984.
---------------------------------------------------------------------------
\2\ See References in Text note below.
---------------------------------------------------------------------------
(h) Right to demand employer securities; put option
(1) In general
A plan meets the requirements of this subsection if a
participant who is entitled to a distribution from the plan--
(A) has a right to demand that his benefits be distributed
in the form of employer securities, and
(B) if the employer securities are not readily tradable on
an established market, has a right to require that the employer
repurchase employer securities under a fair valuation formula.
(2) Plan may distribute cash in certain cases
(A) In general
A plan which otherwise meets the requirements of this
subsection or of section 4975(e)(7) shall not be considered to
have failed to meet the requirements of section 401(a) merely
because under the plan the benefits may be distributed in cash
or in the form of employer securities.
(B) Exception for certain plans restricted from distributing
securities
(i) In general
A plan to which this subparagraph applies shall not be
treated as failing to meet the requirements of this
subsection or section 401(a) merely because it does not
permit a participant to exercise the right described in
paragraph (1)(A) if such plan provides that the participant
entitled to a distribution has a right to receive the
distribution in cash, except that such plan may distribute
employer securities subject to a requirement that such
securities may be resold to the employer under terms which
meet the requirements of paragraph (1)(B).
(ii) Applicable plans
This subparagraph shall apply to a plan which otherwise
meets the requirements of this subsection or section
4975(e)(7) and which is established and maintained by--
(I) an employer whose charter or bylaws restrict the
ownership of substantially all outstanding employer
securities to employees or to a trust described in
section 401(a), or
(II) an S corporation.
(3) Special rule for banks
In the case of a plan established and maintained by a bank (as
defined in section 581) which is prohibited by law from redeeming or
purchasing its own securities, the requirements of paragraph (1)(B)
shall not apply if the plan provides that participants entitled to a
distribution from the plan shall have a right to receive a
distribution in cash.
(4) Put option period
An employer shall be deemed to satisfy the requirements of
paragraph (1)(B) if it provides a put option for a period of at
least 60 days following the date of distribution of stock of the
employer and, if the put option is not exercised within such 60-day
period, for an additional period of at least 60 days in the
following plan year (as provided in regulations promulgated by the
Secretary).
(5) Payment requirement for total distribution
If an employer is required to repurchase employer securities
which are distributed to the employee as part of a total
distribution, the requirements of paragraph (1)(B) shall be treated
as met if--
(A) the amount to be paid for the employer securities is
paid in substantially equal periodic payments (not less
frequently than annually) over a period beginning not later than
30 days after the exercise of the put option described in
paragraph (4) and not exceeding 5 years, and
(B) there is adequate security provided and reasonable
interest paid on the unpaid amounts referred to in subparagraph
(A).
For purposes of this paragraph, the term ``total distribution''
means the distribution within 1 taxable year to the recipient of the
balance to the credit of the recipient's account.
(6) Payment requirement for installment distributions
If an employer is required to repurchase employer securities as
part of an installment distribution, the requirements of paragraph
(1)(B) shall be treated as met if the amount to be paid for the
employer securities is paid not later than 30 days after the
exercise of the put option described in paragraph (4).
(7) Exception where employee elected diversification
Paragraph (1)(A) shall not apply with respect to the portion of
the participant's account which the employee elected to have
reinvested under section 401(a)(28)(B).
(i) Reimbursement for expenses of establishing and administering plan
A plan which otherwise meets the requirements of this section shall
not be treated as failing to meet such requirements merely because it
provides that--
(1) Expenses of establishing plan
As reimbursement for the expenses of establishing the plan, the
employer may withhold from amounts due the plan for the taxable year
for which the plan is established (or the plan may pay) so much of
the amounts paid or incurred in connection with the establishment of
the plan as does not exceed the sum of--
(A) 10 percent of the first $100,000 which the employer is
required to transfer to the plan for that taxable year under
section 41(c)(1)(B),\3\ and
---------------------------------------------------------------------------
\3\ See References in Text note below.
---------------------------------------------------------------------------
(B) 5 percent of any amount so required to be transferred in
excess of the first $100,000; and
(2) Administrative expenses
As reimbursement for the expenses of administering the plan, the
employer may withhold from amounts due the plan (or the plan may
pay) so much of the amounts paid or incurred during the taxable year
as expenses of administering the plan as does not exceed the lesser
of--
(A) the sum of--
(i) 10 percent of the first $100,000 of the dividends
paid to the plan with respect to stock of the employer
during the plan year ending with or within the employer's
taxable year, and
(ii) 5 percent of the amount of such dividends in excess
of $100,000 or
(B) $100,000.
(j) Conditional contributions to the plan
A plan which otherwise meets the requirements of this section shall
not be treated as failing to satisfy such requirements (or as failing to
satisfy the requirements of section 401(a) of this title or of section
403(c)(1) of the Employee Retirement Income Security Act of 1974) merely
because of the return of a contribution (or a provision permitting such
a return) if--
(1) the contribution to the plan is conditioned on a
determination by the Secretary that such plan meets the requirements
of this section,
(2) the application for a determination described in paragraph
(1) is filed with the Secretary not later than 90 days after the
date on which an employee plan credit is claimed, and
(3) the contribution is returned within 1 year after the date on
which the Secretary issues notice to the employer that such plan
does not satisfy the requirements of this section.
(k) Requirements relating to certain withdrawals
Notwithstanding any other law or rule of law--
(1) the withdrawal from a plan which otherwise meets the
requirements of this section by the employer of an amount
contributed for purposes of the matching employee plan credit shall
not be considered to make the benefits forfeitable, and
(2) the plan shall not, by reason of such withdrawal, fail to be
for the exclusive benefit of participants or their beneficiaries,
if the withdrawn amounts were not matched by employee contributions or
were in excess of the limitations of section 415. Any withdrawal
described in the preceding sentence shall not be considered to violate
the provisions of section 403(c)(1) of the Employee Retirement Income
Security Act of 1974. For purposes of this subsection, the reference to
the matching employee plan credit shall refer to such credit as in
effect before the enactment of the Tax Reform Act of 1984.
(l) Employer securities defined
For purposes of this section--
(1) In general
The term ``employer securities'' means common stock issued by
the employer (or by a corporation which is a member of the same
controlled group) which is readily tradable on an established
securities market.
(2) Special rule where there is no readily tradable common
stock
If there is no common stock which meets the requirements of
paragraph (1), the term ``employer securities'' means common stock
issued by the employer (or by a corporation which is a member of the
same controlled group) having a combination of voting power and
dividend rights equal to or in excess of--
(A) that class of common stock of the employer (or of any
other such corporation) having the greatest voting power, and
(B) that class of common stock of the employer (or of any
other such corporation) having the greatest dividend rights.
(3) Preferred stock may be issued in certain cases
Noncallable preferred stock shall be treated as employer
securities if such stock is convertible at any time into stock which
meets the requirements of paragraph (1) or (2) (whichever is
applicable) and if such conversion is at a conversion price which
(as of the date of the acquisition by the tax credit employee stock
ownership plan) is reasonable. For purposes of the preceding
sentence, under regulations prescribed by the Secretary, preferred
stock shall be treated as noncallable if after the call there will
be a reasonable opportunity for a conversion which meets the
requirements of the preceding sentence.
(4) Application to controlled group of corporations
(A) In general
For purposes of this subsection, the term ``controlled group
of corporations'' has the meaning given to such term by section
1563(a) (determined without regard to subsections (a)(4) and
(e)(3)(C) of section 1563).
(B) Where common parent owns at least 50 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing at least 50 percent of the voting
power of all classes of stock and at least 50 percent of each
class of nonvoting stock in a first tier subsidiary, such
subsidiary (and all other corporations below it in the chain
which would meet the 80 percent test of section 1563(a) if the
first tier subsidiary were the common parent) shall be treated
as includible corporations.
(C) Where common parent owns 100 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing all of the voting power of all classes
of stock and all of the nonvoting stock, in a first tier
subsidiary, and if the first tier subsidiary owns directly stock
possessing at least 50 percent of the voting power of all
classes of stock, and at least 50 percent of each class of
nonvoting stock, in a second tier subsidiary of the common
parent, such second tier subsidiary (and all other corporations
below it in the chain which would meet the 80 percent test of
section 1563(a) if the second tier subsidiary were the common
parent) shall be treated as includible corporations.
(5) Nonvoting common stock may be acquired in certain cases
Nonvoting common stock of an employer described in the second
sentence of section 401(a)(22) shall be treated as employer
securities if an employer has a class of nonvoting common stock
outstanding and the specific shares that the plan acquires have been
issued and outstanding for at least 24 months.
(m) Nonrecognition of gain or loss on contribution of employer
securities to tax credit employee stock ownership plan
No gain or loss shall be recognized to the taxpayer with respect to
the transfer of employer securities to a tax credit employee stock
ownership plan maintained by the taxpayer to the extent that such
transfer is required under section 41(c)(1)(B),\4\ or subparagraph (A)
or (B) of section 48(n)(1).\4\
---------------------------------------------------------------------------
\4\ See References in Text note below.
---------------------------------------------------------------------------
(n) Securities received in certain transactions
(1) In general
A plan to which section 1042 applies and an eligible worker-
owned cooperative (within the meaning of section 1042(c)) shall
provide that no portion of the assets of the plan or cooperative
attributable to (or allocable in lieu of) employer securities
acquired by the plan or cooperative in a sale to which section 1042
applies may accrue (or be allocated directly or indirectly under any
plan of the employer meeting the requirements of section 401(a))--
(A) during the nonallocation period, for the benefit of--
(i) any taxpayer who makes an election under section
1042(a) with respect to employer securities,,,\5\
---------------------------------------------------------------------------
\5\ So in original.
---------------------------------------------------------------------------
(ii) any individual who is related to the taxpayer
(within the meaning of section 267(b)), or
(B) for the benefit of any other person who owns (after
application of section 318(a)) more than 25 percent of--
(i) any class of outstanding stock of the corporation
which issued such employer securities or of any corporation
which is a member of the same controlled group of
corporations (within the meaning of subsection (l)(4)) as
such corporation, or
(ii) the total value of any class of outstanding stock
of any such corporation.
For purposes of subparagraph (B), section 318(a) shall be applied
without regard to the employee trust exception in paragraph
(2)(B)(i).
(2) Failure to meet requirements
If a plan fails to meet the requirements of paragraph (1)--
(A) the plan shall be treated as having distributed to the
person described in paragraph (1) the amount allocated to the
account of such person in violation of paragraph (1) at the time
of such allocation,
(B) the provisions of section 4979A shall apply, and
(C) the statutory period for the assessment of any tax
imposed by section 4979A shall not expire before the date which
is 3 years from the later of--
(i) the 1st allocation of employer securities in
connection with a sale to the plan to which section 1042
applies, or
(ii) the date on which the Secretary is notified of such
failure.
(3) Definitions and special rules
For purposes of this subsection--
(A) Lineal descendants
Paragraph (1)(A)(ii) shall not apply to any individual if--
(i) such individual is a lineal descendant of the
taxpayer, and
(ii) the aggregate amount allocated to the benefit of
all such lineal descendants during the nonallocation period
does not exceed more than 5 percent of the employer
securities (or amounts allocated in lieu thereof) held by
the plan which are attributable to a sale to the plan by any
person related to such descendants (within the meaning of
section 267(c)(4)) in a transaction to which section 1042
applied.
(B) 25-percent shareholders
A person shall be treated as failing to meet the stock
ownership limitation under paragraph (1)(B) if such person fails
such limitation--
(i) at any time during the 1-year period ending on the
date of sale of qualified securities to the plan or
cooperative, or
(ii) on the date as of which qualified securities are
allocated to participants in the plan or cooperative.
(C) Nonallocation period
The term ``nonallocation period'' means the period beginning
on the date of the sale of the qualified securities and ending
on the later of--
(i) the date which is 10 years after the date of sale,
or
(ii) the date of the plan allocation attributable to the
final payment of acquisition indebtedness incurred in
connection with such sale.
(o) Distribution and payment requirements
A plan meets the requirements of this subsection if--
(1) Distribution requirement
(A) In general
The plan provides that, if the participant and, if
applicable pursuant to sections 401(a)(11) and 417, with the
consent of the participant's spouse elects, the distribution of
the participant's account balance in the plan will commence not
later than 1 year after the close of the plan year--
(i) in which the participant separates from service by
reason of the attainment of normal retirement age under the
plan, disability, or death, or
(ii) which is the 5th plan year following the plan year
in which the participant otherwise separates from service,
except that this clause shall not apply if the participant
is reemployed by the employer before distribution is
required to begin under this clause.
(B) Exception for certain financed securities
For purposes of this subsection, the account balance of a
participant shall not include any employer securities acquired
with the proceeds of the loan described in section 404(a)(9)
until the close of the plan year in which such loan is repaid in
full.
(C) Limited distribution period
The plan provides that, unless the participant elects
otherwise, the distribution of the participant's account balance
will be in substantially equal periodic payments (not less
frequently than annually) over a period not longer than the
greater of--
(i) 5 years, or
(ii) in the case of a participant with an account
balance in excess of $500,000, 5 years plus 1 additional
year (but not more than 5 additional years) for each
$100,000 or fraction thereof by which such balance exceeds
$500,000.
(2) Cost-of-living adjustment
The Secretary shall adjust the dollar amounts under paragraph
(1)(C) at the same time and in the same manner as under section
415(d).
(p) Prohibited allocations of securities in an S corporation
(1) In general
An employee stock ownership plan holding employer securities
consisting of stock in an S corporation shall provide that no
portion of the assets of the plan attributable to (or allocable in
lieu of) such employer securities may, during a nonallocation year,
accrue (or be allocated directly or indirectly under any plan of the
employer meeting the requirements of section 401(a)) for the benefit
of any disqualified person.
(2) Failure to meet requirements
(A) In general
If a plan fails to meet the requirements of paragraph (1),
the plan shall be treated as having distributed to any
disqualified person the amount allocated to the account of such
person in violation of paragraph (1) at the time of such
allocation.
(B) Cross reference
For excise tax relating to violations of paragraph (1) and
ownership of synthetic equity, see section 4979A.
(3) Nonallocation year
For purposes of this subsection--
(A) In general
The term ``nonallocation year'' means any plan year of an
employee stock ownership plan if, at any time during such plan
year--
(i) such plan holds employer securities consisting of
stock in an S corporation, and
(ii) disqualified persons own at least 50 percent of the
number of shares of stock in the S corporation.
(B) Attribution rules
For purposes of subparagraph (A)--
(i) In general
The rules of section 318(a) shall apply for purposes of
determining ownership, except that--
(I) in applying paragraph (1) thereof, the members
of an individual's family shall include members of the
family described in paragraph (4)(D), and
(II) paragraph (4) thereof shall not apply.
(ii) Deemed-owned shares
Notwithstanding the employee trust exception in section
318(a)(2)(B)(i), an individual shall be treated as owning
deemed-owned shares of the individual.
Solely for purposes of applying paragraph (5), this subparagraph
shall be applied after the attribution rules of paragraph (5)
have been applied.
(4) Disqualified person
For purposes of this subsection--
(A) In general
The term ``disqualified person'' means any person if--
(i) the aggregate number of deemed-owned shares of such
person and the members of such person's family is at least
20 percent of the number of deemed-owned shares of stock in
the S corporation, or
(ii) in the case of a person not described in clause
(i), the number of deemed-owned shares of such person is at
least 10 percent of the number of deemed-owned shares of
stock in such corporation.
(B) Treatment of family members
In the case of a disqualified person described in
subparagraph (A)(i), any member of such person's family with
deemed-owned shares shall be treated as a disqualified person if
not otherwise treated as a disqualified person under
subparagraph (A).
(C) Deemed-owned shares
(i) In general
The term ``deemed-owned shares'' means, with respect to
any person--
(I) the stock in the S corporation constituting
employer securities of an employee stock ownership plan
which is allocated to such person under the plan, and
(II) such person's share of the stock in such
corporation which is held by such plan but which is not
allocated under the plan to participants.
(ii) Person's share of unallocated stock
For purposes of clause (i)(II), a person's share of
unallocated S corporation stock held by such plan is the
amount of the unallocated stock which would be allocated to
such person if the unallocated stock were allocated to all
participants in the same proportions as the most recent
stock allocation under the plan.
(D) Member of family
For purposes of this paragraph, the term ``member of the
family'' means, with respect to any individual--
(i) the spouse of the individual,
(ii) an ancestor or lineal descendant of the individual
or the individual's spouse,
(iii) a brother or sister of the individual or the
individual's spouse and any lineal descendant of the brother
or sister, and
(iv) the spouse of any individual described in clause
(ii) or (iii).
A spouse of an individual who is legally separated from such
individual under a decree of divorce or separate maintenance
shall not be treated as such individual's spouse for purposes of
this subparagraph.
(5) Treatment of synthetic equity
For purposes of paragraphs (3) and (4), in the case of a person
who owns synthetic equity in the S corporation, except to the extent
provided in regulations, the shares of stock in such corporation on
which such synthetic equity is based shall be treated as outstanding
stock in such corporation and deemed-owned shares of such person if
such treatment of synthetic equity of 1 or more such persons results
in--
(A) the treatment of any person as a disqualified person, or
(B) the treatment of any year as a nonallocation year.
For purposes of this paragraph, synthetic equity shall be treated as
owned by a person in the same manner as stock is treated as owned by
a person under the rules of paragraphs (2) and (3) of section
318(a). If, without regard to this paragraph, a person is treated as
a disqualified person or a year is treated as a nonallocation year,
this paragraph shall not be construed to result in the person or
year not being so treated.
(6) Definitions
For purposes of this subsection--
(A) Employee stock ownership plan
The term ``employee stock ownership plan'' has the meaning
given such term by section 4975(e)(7).
(B) Employer securities
The term ``employer security'' has the meaning given such
term by section 409(l).
(C) Synthetic equity
The term ``synthetic equity'' means any stock option,
warrant, restricted stock, deferred issuance stock right, or
similar interest or right that gives the holder the right to
acquire or receive stock of the S corporation in the future.
Except to the extent provided in regulations, synthetic equity
also includes a stock appreciation right, phantom stock unit, or
similar right to a future cash payment based on the value of
such stock or appreciation in such value.
(7) Regulations and guidance
(A) In general
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subsection.
(B) Avoidance or evasion
The Secretary may, by regulation or other guidance of
general applicability, provide that a nonallocation year occurs
in any case in which the principal purpose of the ownership
structure of an S corporation constitutes an avoidance or
evasion of this subsection.
(q) Cross references
(1) For requirements for allowance of employee plan credit,
see section 48(n).\6\
---------------------------------------------------------------------------
\6\ See References in Text note below.
---------------------------------------------------------------------------
(2) For assessable penalties for failure to meet
requirements of this section, or for failure to make
contributions required with respect to the allowance of an
employee plan credit or employee stock ownership credit, see
section 6699.\6\
(3) For requirements for allowance of an employee stock
ownership credit, see section 41.\6\
(Added Pub. L. 95-600, title I, Sec. 141(a), Nov. 6, 1978, 92 Stat.
2787, Sec. 409A; amended Pub. L. 96-222, title I, Sec. 101(a)(7)(D)-(F),
(I), (J), (L)(i)(VI), (ii)(I), (II), (iii)(V), (v)(VI), (VII), Apr. 1,
1980, 94 Stat. 198-200; Pub. L. 96-605, title II, Sec. 224(a), Dec. 28,
1980, 94 Stat. 3528; Pub. L. 97-34, title III, Secs. 331(c)(1), 334,
336, 337(a), Aug. 13, 1981, 95 Stat. 293, 297, 298; Pub. L. 97-448,
title I, Sec. 103(h), (i), Jan. 12, 1983, 96 Stat. 2379; renumbered
Sec. 409 and amended Pub. L. 98-369, div. A, title IV, Secs. 474(r)(15),
491(e)(1), July 18, 1984, 98 Stat. 843, 852; Pub. L. 99-514, title XI,
Secs. 1172(b)(1), 1174(a)(1), (b)(1), (2), (c)(1)(A), 1176(b), title
XVIII, Secs. 1852(a)(4)(B), 1854(a)(3)(A), (f)(1), (3)(C), 1899A(11),
Oct. 22, 1986, 100 Stat. 2514, 2516, 2517, 2520, 2865, 2873, 2881, 2882,
2958; Pub. L. 100-647, title I, Secs. 1011B(g)(1), (2), (i)(1), (3),
(j)(3), (5), (k)(3), 1018(t)(4)(B), (C), (H), Nov. 10, 1988, 102 Stat.
3490, 3492, 3493, 3588, 3589; Pub. L. 101-239, title VII,
Secs. 7304(a)(2)(A), (B), 7811(h)(1), Dec. 19, 1989, 103 Stat. 2352,
2353, 2409; Pub. L. 105-34, title XV, Sec. 1506(a), Aug. 5, 1997, 111
Stat. 1064; Pub. L. 107-16, title VI, Sec. 656(a), June 7, 2001, 115
Stat. 131.)
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.
References in Text
Section 41, referred to in subsecs. (b)(1)(A), (4), (g), (i)(1)(A),
(m), and (p), which related to employee stock ownership credit, was
repealed by Pub. L. 99-514, title XI, Sec. 1171(a), Oct. 22, 1986, 100
Stat. 2513. Section 30 of this title, relating to credit for increasing
research activities, was renumbered section 41.
Section 12 of the Securities Exchange Act of 1934, referred to in
subsec. (e)(4), is classified to section 78l of Title 15, Commerce and
Trade.
Section 403(c)(1) of the Employee Retirement Income Security Act of
1974, referred to in subsecs. (j) and (k), is classified to section
1103(c)(1) of Title 29, Labor.
The enactment of the Tax Reform Act of 1984, referred to in subsecs.
(g) and (k), means the enactment of div. A of Pub. L. 98-369, which was
approved July 18, 1984.
Subsec. (n) of section 48, referred to in subsecs. (g), (m), and
(p)(1), was repealed by section 474(o)(15) of Pub. L. 98-369.
Section 6699, referred to in subsec. (p)(2), was repealed by Pub. L.
99-514, title XI, Sec. 1171(b)(7)(A), Oct. 22, 1986, 100 Stat. 2513.
Prior Provisions
A prior section 409, added Pub. L. 93-406, title II, Sec. 2002(c),
Sept. 2, 1974, 88 Stat. 964; amended Pub. L. 94-455, title XV,
Sec. 1501(b)(6), title XIX, Secs. 1901(a)(60), 1906(b)(13)(A), Oct. 4,
1976, 90 Stat. 1736, 1774, 1834; Pub. L. 95-600, title I,
Secs. 156(c)(2), (3), 157(e)(1)(B), Nov. 6, 1978, 92 Stat. 2803, 2806;
Pub. L. 96-222, title I, Sec. 101(a)(14)(B), Apr. 1, 1980, 94 Stat. 204;
Pub. L. 97-34, title III, Sec. 311(g)(1)(D), (3), Aug. 13, 1981, 95
Stat. 281; Pub. L. 97-248, title II, Sec. 243(b)(1)(B), title III,
Sec. 335(a)(2), Sept. 3, 1982, 96 Stat. 523, 628; Pub. L. 97-452,
Sec. 2(c)(1), Jan. 12, 1983, 96 Stat. 2478; Pub. L. 98-369, div. A,
title I, Sec. 42(a)(7), title V, Sec. 522(d)(13), July 18, 1984, 98
Stat. 557, 871, related to retirement bonds, prior to repeal by Pub. L.
98-369, div. A, title IV, Sec. 491(b), (f)(1), July 18, 1984, 98 Stat.
848, 853, applicable to obligations issued after Dec. 31, 1983.
Amendments
2001--Subsecs. (p), (q). Pub. L. 107-16, Secs. 656(a), 901,
temporarily added subsec. (p) and redesignated former subsec. (p) as
(q). See Effective and Termination Dates of 2001 Amendment note below.
1997--Subsec. (h)(2). Pub. L. 105-34 designated existing provisions
as subpar. (A), inserted subpar. heading, struck out ``In the case of an
employer whose charter or bylaws restrict the ownership of substantially
all outstanding employer securities to employees or to a trust described
in section 401(a), a plan which otherwise meets the requirements of this
subsection or section 4975(e)(7) shall not be considered to have failed
to meet the requirements of this subsection or of section 401(a) merely
because it does not permit a participant to exercise the right described
in paragraph (1)(A) if such plan provides that participants entitled to
a distribution from the plan shall have a right to receive such
distribution in cash, except that such plan may distribute employer
securities subject to a requirement that such securities may be resold
to the employer under terms which meet the requirements of paragraph
(1)(B).'' after ``employer securities.'', and added subpar. (B).
1989--Subsec. (l)(5). Pub. L. 101-239, Sec. 7811(h)(1), substituted
``the second sentence'' for ``the last sentence''.
Subsec. (n)(1). Pub. L. 101-239, Sec. 7304(a)(2)(A)(i), struck out
``or section 2057'' after ``section 1042'' in two places in introductory
provisions.
Subsec. (n)(1)(A)(i). Pub. L. 101-239, Sec. 7304(a)(2)(A)(ii),
struck out ``or any decedent if the executor of the estate of such
decedent makes a qualified sale to which section 2057 applies'' after
``employer securities,''.
Subsec. (n)(1)(A)(ii). Pub. L. 101-239, Sec. 7304(a)(2)(A)(iii),
struck out ``or the decedent'' after ``the taxpayer''.
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 101-239,
Sec. 7304(a)(2)(B), struck out ``or section 2057'' after ``section
1042''.
1988--Subsec. (d). Pub. L. 100-647, Sec. 1011B(j)(3), inserted ``or
to any distribution or reinvestment required under section 401(a)(28)''
after ``under section 401(a)(9)''.
Subsec. (e)(5). Pub. L. 100-647, Sec. 1018(t)(4)(H), substituted
``paragraph (3)'' for ``paragraph (2) or (3)''.
Subsec. (h)(2). Pub. L. 100-647, Sec. 1018(t)(4)(B), substituted
``paragraph (1)(B)'' for ``section 409(o)''.
Subsec. (h)(7). Pub. L. 100-647, Sec. 1011B(j)(5), added par. (7).
Subsec. (l)(4), (5). Pub. L. 100-647, Sec. 1011B(k)(3), redesignated
par. (4), relating to nonvoting common stock may be acquired in certain
cases, as (5).
Subsec. (n)(1). Pub. L. 100-647, Sec. 1011B(g)(1), made technical
amendment to directory language of Pub. L. 99-514, Sec. 1172(b)(1). See
1986 Amendment note below.
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 100-647, Sec. 1011B(g)(2),
inserted ``or section 2057'' after ``which section 1042''.
Subsec. (n)(3)(C). Pub. L. 100-647, Sec. 1018(t)(4)(C), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as follows:
``The term `nonallocation period' means the 10-year period beginning on
the later of--
``(i) the date of the sale of the qualified securities, or
``(ii) the date of the plan allocation attributable to the final
payment of acquisition indebtedness incurred in connection with such
sale.''
Subsec. (o)(1)(A). Pub. L. 100-647, Sec. 1011B(i)(3), substituted
``if the participant and, if applicable pursuant to sections 401(a)(11)
and 417, with the consent of the participant's spouse elects'' for
``unless the participant otherwise elects''.
Subsec. (o)(1)(A)(ii). Pub. L. 100-647, Sec. 1011B(i)(1),
substituted ``distribution is required to begin under this clause'' for
``such year''.
1986--Subsec. (a)(3). Pub. L. 99-514, Sec. 1174(b)(2), inserted
reference to subsec. (o).
Subsec. (d). Pub. L. 99-514, Sec. 1899A(11), substituted
``participant's'' for ``participants's''.
Pub. L. 99-514, Sec. 1852(a)(4)(B), inserted at end ``This
subsection shall not apply to any distribution required under section
401(a)(9).''
Subsec. (d)(1). Pub. L. 99-514, Sec. 1174(a)(1), substituted
``separation from service, or termination of the plan'' for ``or
separation from service''.
Subsec. (e)(2). Pub. L. 99-514, Sec. 1854(f)(1)(C), (D), inserted
``or beneficiary'' after ``participant'' in two places and substituted
``securities of the employer'' for ``employer securities''.
Subsec. (e)(3). Pub. L. 99-514, Sec. 1854(f)(1)(B)-(D), inserted
``or beneficiary'' after ``participant'' in two places and substituted
``securities of the employer'' for ``employer securities'' and ``any
corporate matter which involves the voting of such shares with respect
to the approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business, or such similar
transaction as the Secretary may prescribe in regulations'' for ``a
corporate matter which (by law or charter) must be decided by more than
a majority vote of outstanding common shares voted''.
Subsec. (e)(5). Pub. L. 99-514, Sec. 1854(f)(1)(A), added par. (5).
Subsec. (h)(2). Pub. L. 99-514, Sec. 1854(f)(3)(C), inserted ``,
except that such plan may distribute employer securities subject to a
requirement that such securities may be resold to the employer under
terms which meet the requirements of section 409(o)''.
Subsec. (h)(5), (6). Pub. L. 99-514, Sec. 1174(c)(1)(A), added pars.
(5) and (6).
Subsec. (l)(4). Pub. L. 99-514, Sec. 1176(b), added par. (4)
relating to acquisition of nonvoting common stock.
Subsec. (n). Pub. L. 99-514, Sec. 1854(a)(3)(A), added subsec. (n).
Former subsec. (n) redesignated (o).
Subsec. (n)(1). Pub. L. 99-514, Sec. 1172(b)(1), as amended by Pub.
L. 100-647, Sec. 1011B(g)(1), inserted ``or section 2057'' in two places
in introductory provisions, ``or any decedent if the executor of the
estate of such decedent makes a qualified sale to which section 2057
applies,'' in subpar. (A)(i), and ``or the decedent'' in subpar.
(A)(ii).
Subsec. (o). Pub. L. 99-514, Sec. 1174(b)(1), added subsec. (o).
Former subsec. (o) redesignated (p).
Pub. L. 99-514, Sec. 1854(a)(3)(A), redesignated former subsec. (n)
as (o).
Subsec. (p). Pub. L. 99-514, Sec. 1174(b)(1), redesignated former
subsec. (o) as (p).
1984--Subsec. (b)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A), (B),
substituted ``41'' for ``44G'' and struck out ``48(n)(1)(A) or'' after
``requirements of section''.
Subsec. (b)(4). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
``41'' for ``44G''.
Subsec. (g). Pub. L. 98-369, Sec. 474(r)(15)(A), (C), substituted
``41'' for ``44G'' in two places, and inserted provision directing that,
for purposes of the preceding sentence, the references to section
48(n)(1) and the employee plan credit shall refer to such section and
credit as in effect before the enactment of the Tax Reform Act of 1984.
Subsec. (i)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A), (D),
substituted ``41'' for ``44G'', and struck out ``48(n)(1) or'' after
``taxable year under section''.
Subsec. (k). Pub. L. 98-369, Sec. 474(r)(15)(E), inserted provision
requiring that, for purposes of this subsection, the reference to the
matching employee plan credit refer to such credit as in effect before
the enactment of the Tax Reform Act of 1984.
Subsec. (m). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted ``41''
for ``44G''.
Subsec. (n)(3). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
``41'' for ``44G''.
1983--Subsec. (d)(2). Pub. L. 97-448, Sec. 103(i), struck out
provisions covering the sale of substantially all of the stock of a
subsidiary of the employer.
Subsec. (h)(2). Pub. L. 97-448, Sec. 103(h), substituted ``the
requirements of this subsection or of section 401(a)'' for ``the
requirements of section 401(a)''.
1981--Subsec. (b). Pub. L. 97-34, Sec. 331(c)(1)(A), (B), inserted
in par. (1)(A) reference to section 44G(c)(1)(B), and inserted in par.
(4) ``or the credit allowed under section 44G (relating to the employee
stock ownership credit)'' after ``basic employee plan credit''.
Subsec. (d). Pub. L. 97-34, Sec. 337, designated provision relating
to death, disability, or separation from service as par. (1) and added
pars. (2) and (3).
Subsec. (g). Pub. L. 97-34, Sec. 331(c)(1)(C), (D), inserted
reference to section 44G(c)(1)(B) and inserted ``or the credit allowed
under section 44G (relating to employee stock ownership credit)'' after
``employee plan credit''.
Subsec. (h)(2). Pub. L. 97-34, Sec. 334, substituted ``this
subsection'' for ``this section'' and inserted provision respecting
receipt of distributions in cash where employer's charter or bylaws
restrict ownership of substantially all outstanding employer securities
to employees or to a section 401(a) trust where a participant is not
permitted to exercise the right described in par. (1)(A).
Subsec. (h)(3), (4). Pub. L. 97-34, Sec. 336, added pars. (3) and
(4).
Subsec. (i)(1)(A). Pub. L. 97-34, Sec. 331(c)(1)(E), inserted
reference to section 44G(c)(1)(B).
Subsec. (m). Pub. L. 97-34, Sec. 331(c)(1)(F), inserted reference to
section 44G(c)(1)(B).
Subsec. (n)(2), (3). Pub. L. 97-34, Sec. 331(c)(1)(G), (H), inserted
``or employee stock ownership credit'' after ``employee plan credit'' in
par. (2) and added par. (3).
1980--Pub. L. 96-222, Sec. 101(a)(7)(L)(v)(VII), substituted ``tax
credit employee stock ownership plans'' for ``ESOPS'' in section
catchline.
Subsec. (a). Pub. L. 96-222, Sec. 101(a)(7)(L)(ii)(I), (v)(VI),
substituted in heading and in text ``tax credit employee stock ownership
plan'' for ``ESOP''.
Subsec. (b)(4). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted ``employee plan credit'' for ``ESOP credit''.
Subsec. (d). Pub. L. 96-222, Sec. 101(a)(7)(F), inserted ``(or
allocated to a participant's account in connection with matched employer
and employee contributions)'' after ``under subsection (b)''.
Subsec. (f)(1). Pub. L. 96-222, Sec. 101(a)(7)(I)(i), substituted
``only if it is established on or before the due date (including any
extension of such date) for the filing of the employer's tax return for
the first taxable year of the employer for which an employee plan credit
is claimed by the employer with respect to the plan'' for ``for a plan
year only if it is established on or before the due date for the filing
of the employer's tax return for the taxable year (including any
extension of such date) in which or with which the plan year ends''.
Subsec. (f)(2). Pub. L. 96-222, Sec. 101(a)(7)(I)(ii), (L)(v)(VII),
substituted ``employee plan'' for ``ESOP'' and inserted ``with respect
to the plan'' after ``by the employer''.
Subsec. (g). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V), substituted
``employee plan credit'' for ``ESOP credit''.
Subsec. (h)(2). Pub. L. 96-222, Sec. 101(a)(7)(E), inserted ``or of
section 4975(e)(7)'' after ``the requirements of this section''.
Subsecs. (j)(2), (k)(1). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted ``employee plan credit'' for ``ESOP credit''.
Subsec. (l)(2)(B). Pub. L. 96-222, Sec. 101(a)(7)(J)(i), substituted
``class of common stock'' for ``class of stock''.
Subsec. (l)(3). Pub. L. 96-222, Sec. 101(a)(7)(J)(ii), (L)(ii)(II),
substituted ``as employer securities'' for ``as meeting the requirements
of paragraph (1)'', ``paragraph (1) or (2)'' for ``paragraph (2)'', and
``tax credit employee stock ownership plan'' for ``ESOP'' and inserted
provisions requiring preferred stock to be treated as noncallable if
after the call there will be a reasonable opportunity for a conversion
which meets the requirements of the preceding sentence.
Subsec. (l)(4). Pub. L. 96-605 substituted in heading ``Application
to controlled group of corporations'' for ``Controlled group of
corporations defined'' and in subpar. (B) heading ``Where common parent
owns at least'' for ``Common parent may own only'' and added subpar.
(C).
Subsec. (m). Pub. L. 96-222, Sec. 101(a)(7)(D), (L)(i), substituted
provisions relating to nonrecognition of gain or loss on contribution of
employer securities to a tax credit employee stock ownership plan for
provisions relating to contributions of stock of a controlling
corporation.
Subsec. (n). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V), substituted
``employee plan credit'' for ``ESOP credit'' in pars. (1) and (2).
Effective and Termination Dates of 2001 Amendment
Pub. L. 107-16, title VI, Sec. 656(d), June 7, 2001, 115 Stat. 135,
provided that:
``(1) In general.--The amendments made by this section [amending
this section and sections 4975 and 4979A of this title] shall apply to
plan years beginning after December 31, 2004.
``(2) Exception for certain plans.--In the case of any--
``(A) employee stock ownership plan established after March 14,
2001, or
``(B) employee stock ownership plan established on or before
such date if employer securities held by the plan consist of stock
in a corporation with respect to which an election under section
1362(a) of the Internal Revenue Code of 1986 is not in effect on
such date,
the amendments made by this section shall apply to plan years ending
after March 14, 2001.''
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal Revenue
Code of 1986 to be applied and administered to such years as if such
amendment had never been enacted, see section 901 of Pub. L. 107-16, set
out as a note under section 1 of this title.
Effective Date of 1997 Amendment
Section 1506(c) of Pub. L. 105-34 provided that: ``The amendments
made by this section [amending this section, section 4975 of this title,
and section 1108 of Title 29, Labor] shall apply to taxable years
beginning after December 31, 1997.''
Effective Date of 1989 Amendment
Section 7304(a)(3) of Pub. L. 101-239 provided that: ``The
amendments made by this subsection [amending this section and sections
4978 and 4979A of this title and repealing sections 2057 and 4978A of
this title] shall apply to the estates of decedents dying after the date
of the enactment of this Act [Dec. 19, 1989].''
Amendment by section 7811(h)(1) 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 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 1172(c) of Pub. L. 99-514 provided that: ``The amendments
made by this section [enacting section 2057 of this title and amending
this section and section 4979A of this title] shall apply to sales after
the date of the enactment of this Act [Oct. 22, 1986] with respect to
which an election is made by the executor of an estate who is required
to file the return of the tax imposed by the Internal Revenue Code of
1986 on a date (including extensions) after the date of the enactment of
this Act.''
Section 1174(a)(2) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011B(i)(2), Nov. 10, 1988, 102 Stat. 3492, provided that:
``The amendment made by this subsection [amending this section] shall
apply to distributions after December 31, 1984.''
Section 1174(b)(3) of Pub. L. 99-514 provided that: ``The amendments
made by this subsection [amending this section] shall apply to
distributions attributable to stock acquired after December 31, 1986.''
Section 1174(c)(1)(B) of Pub. L. 99-514 provided that: ``The
amendment made by this paragraph [amending this section] shall apply to
distributions attributable to stock acquired after December 31, 1986,
except that a plan may elect to have such amendment apply to all
distributions after the date of the enactment of this Act [Oct. 22,
1986].''
Amendment by section 1176(b) of Pub. L. 99-514 applicable to
acquisitions of securities after Dec. 31, 1986, see section 1176(c) of
Pub. L. 99-514, set out as a note under section 401 of this title.
Amendment by section 1852(a)(4)(B) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of the
Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note under
section 48 of this title.
Section 1854(a)(3)(C) of Pub. L. 99-514, as amended by Pub. L. 100-
647, title I, Sec. 1018(t)(4)(G), Nov. 10, 1988, 102 Stat. 3588,
provided that:
``(i) Except as provided in clause (ii), the amendments made by this
paragraph [amending this section and section 1042 of this title] shall
apply to sales of securities after the date of the enactment of this Act
[Oct. 22, 1986].
``(ii) A taxpayer or executor may elect to have section 1042(b)(3)
of the Internal Revenue Code of 1954 (as in effect before the amendment
made by subparagraph (B)) apply to sales before the date of the
enactment of this Act as if such section included the last sentence of
section 409(n)(1) of the Internal Revenue Code of 1986 (as added by
subparagraph (A)).''
Section 1854(f)(4)(A), (B) of Pub. L. 99-514 provided that:
``(A) The amendments made by paragraph (1)(A) and (3) [amending this
section and sections 1042 and 4975 of this title] shall take effect on
the date of the enactment of this Act [Oct. 22, 1986].''
``(B) The amendments made by subparagraphs (B), (C), and (D) of
paragraph (1) [amending this section] shall apply after December 31,
1986, to stock acquired after December 31, 1979.''
Effective Date of 1984 Amendment
Amendment by section 474(r)(15) 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.
Redesignation of section 409A as 409 by section 491(e)(1) of Pub. L.
98-369 effective Jan. 1, 1984, see section 491(f)(3) of Pub. L. 98-369,
set out as a note under section 401 of this title.
Effective Date of 1983 Amendment
Amendment by Pub. L. 97-448 effective, 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 1981 Amendment
Amendment by section 331(c)(1) of Pub. L. 97-34 applicable to
taxable years ending after Dec. 31, 1982, see section 331(f)(2) of Pub.
L. 97-34, set out as a note under section 404 of this title.
Section 337(b) of Pub. L. 97-34, 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] shall apply to
distributions described in section 409A(d) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954] (or any corresponding provision of prior
law) made after March 29, 1975.''
Amendment by sections 334 and 336 of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1981, see section 339 of Pub. L.
97-34, set out as a note under section 401 of this title.
Effective Date of 1980 Amendments
Section 224(b) of Pub. L. 96-605 provided that: ``The amendment made
by subsection (a) [amending this section] shall apply with respect to
qualified investment for taxable years beginning after December 31,
1978.''
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
Section 141(g) of Pub. L. 95-600, as added by Pub. L. 96-222, title
I, Sec. 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; amended by Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
``(1) In general.--Except as otherwise provided in this subsection
and subsection (h) [set out as an Effective Date of 1978 Amendment note
under section 4975 of this title], the amendments made by this section
[enacting sections 409A [now 409] and 6699 of this title and amending
sections 46, 48, 56, 401, 404, 415, 805, 1504, and 4975 of this title]
shall apply with respect to qualified investment for taxable years
beginning after December 31, 1978.
``(2) Election to have amendments apply during 1978.--At the
election of the taxpayer, paragraph (1) shall be applied by substituting
`December 31, 1977' for `December 31, 1978'; except that in the case of
a plan in existence before December 31, 1978, any such election shall
not affect the required allocation of employer securities attributable
to qualified investment for taxable years beginning before January 1,
1979. An election under the preceding sentence shall be made at such
time and in such manner as the Secretary of the Treasury or his delegate
shall prescribe. Such an election, once made, shall be irrevocable.
``(3) Voting right provisions.--Section 409A(e) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a))
[now section 409] shall apply to plans to which section 409A of such
Code applies, beginning with the first day of such application.
``(4) Right to demand employer securities, etc.--Paragraphs (1)(A)
and (2) of section 409A(h) of the Internal Revenue Code of 1986 (as
added by subsection (a)) [now section 409] shall apply to distributions
after December 31, 1978, made by a plan to which section 409A of such
Code applies.
``(5) Subsection (f)(7).--The amendment made by subsection (f)(7)
[amending section 415 of this title] shall apply to years beginning
after December 31, 1978.
``(6) Retroactive application of amendment made by subsection (d).--
In determining the regular tax deduction under section 56(c) of the
Internal Revenue Code of 1986 for any taxable year beginning before
January 1, 1979, the amount of the credit allowable under section 38 of
such Code shall be determined without regard to section 46(a)(2)(B) of
such Code (as in effect before the enactment of the Energy Tax Act of
1978 [Nov. 9, 1978]).''
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.
Section Referred to in Other Sections
This section is referred to in sections 401, 404, 411, 414, 415,
512, 664, 1042, 4975, 4978, 4979A, 4980 of this title; title 28 section
3010; title 29 sections 1054, 1055.
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 656(a)]
[Document affected by Public Law 107-16 Section 656(d)]
[CITE: 26USC409]
Link to Source U. S. Government Document
|
