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 90 STAT. 1750

PUBLIC LAW 94-455—OCT. 4, 1976 estate investment t r u s t furnishes or renders services to the tena n t s of such property, o r manages or operates such property, other than through an independent contractor from whom the t r u s t itself does not derive or receive any income.

,«»ft8 ><• f ')<;

" (3) INDEPENDENT CONTRACTOR DEFINED.—For purposes of t h i s

subsection and subsection (e), the term 'independent contractor' means any person— " (A) who does not own, directly or indirectly, more than 35 percent of the shares, or certificates of beneficial interest, in the real estate investment t r u s t; and " (B) if such person is a corporation, not more than 35 percent of the total combined voting power of whose stock (or 35 percent of the total shares of all classes of whose stock), or, if such person is not a corporation, not more than 35 percent of the interest in whose assets or net profits is owned, directly or indirectly, by one or more persons owning 35 percent or more of the shares or certificates of beneficial interest in the trust. "(4)

SPECIAL RULE FOR CERTAIN CONTINGENT RENTS.—Where a

real estate investment t r u s t receives or accrues, with respect to real or personal property, any amount which would be excluded from the term 'rents from real property ' solely because the t e n a n t of the real estate investment trust receives or accrues, directly or indirectly, from subtenants any amount the determination of which depends in whole or in part on the income or profits derived by any person from such property, only a proportionate part (determined pursuant to regulations prescribed by the Secretary) of the amount received or accrued by the real estate investment t r u s t from that t e n a n t will be excluded from the term 'rents from real property'. " (5) CONSTRUCTIVE OWNERSHIP OF STOCK.—For purposes of this subsection, the rules prescribed by section 318(a) for determining the ownership of stock shall apply in determining the ownership of stock, assets, or net profits of any person; except that '10 percent' shall be substituted for '50 percent' in subparagraph (C) of section 318(a)(2) and 318 (a)(3). " (c) C O M M I T M E N T F E E S. —

26 USC 856.

^ ^

26 USC 857.

(1) IN GENERAL.—Paragraphs (2) and (3) of section 856(c) (relating to limitations) are each amended by striking out " and " after the semicolon a t the end of subparagraph (E), by inserting " and " after the semicolon at the end of subparagraph (F), and by a d d i n g a t the end thereof the following new subparagraph: " (G) amounts (other than amounts the determination of which depends in whole or in part on the income or profits of any person) received or accrued as consideration for entering into agreements (i) to make loans secured by mortgages on real property or on interests in real property or (ii) to purchase or lease real property (including interests in real property and interests in mortgages on real property); ". (2) CONFORMING AMENDMENT.—Section 857(b)(4)(B) (relati n g to net income from foreclosure property) is amended by striking out " (D), or (E) " in subdivision (i) and inserting in lieu thereof " (D), (E), o r (G) ". (d) INCOME F R O M SALE OF MORTGAGES H E L D L E S S T H A N 4 Y E A R S. —

Section 8 5 6 (c)(4) (relating to limitations) is amended to read as follows: . . n., n " (4) less than 30 percent of its gross income is derived from the sale or other disposition of— .,..

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 PUBLIC LAW 94-455—OCT. 4, 1976 %;'•

90 STAT. 1751

" (A) stock or securities held for less than 6 months; " (B) section 1221(1) property (other than foreclosure property); and " (C) real property (including interests in real property and interests in mortgages on real property) held for less than 4 years other than — " (i) property compulsorily or involuntarily converted within the meaning of section 1033, and " ( i i) property which is foreclosure property within the definition of section 856(e); and".

(e)

OPTIONS To PURCHASE R E A L PROPERTY TREATED AS INTERESTS

IN REAL PROPERTY.—Section 856(c)(6)(C) (relating to limitations) is 26 USC 856. amended to read as follows: " (C) The term 'interests in real property ' includes fee own- "Interests in real ership and co-ownership of land or improvements thereon, property." leaseholds of land or improvements thereon, options to acquire land or improvements thereon, and options to acquire leaseholds of land or improvements thereon, but does not include mineral, oil, or gas royalty interests." (f)

R E A L ESTATE INVESTMENT TRUSTS M A Y B E INCORPORATED.—

(1) IN GENERAL.—So much of subsection (a) of section 856 (defining real estate investment t r u s t) as precedes paragraph (3) thereof is amended to read as follows: " (a) IN GENERAL.—For purposes of this title, the term 'real estate "Real estate investment investment t r u s t ' means a corporation, trust, or association— " (1) which is managed by one or more trustees or directors; trust," " (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;". (2) EXCEPTION FOR FINANCIAL INSTITUTIONS AND INSURANCE COM-

PANIES.—Section 856(a) (defining real estate investment trust) Ante, p. 1748 is amended by inserting after paragraph (3) the following new paragraph: " (4) which is neither (A) a financial institution to which section 585, 586, or 593 applies, nor (B) an insurance company to which subchapter L applies;". 26 USC 801. (3) CONFORMING AMENDMENTS.—

(A) So much of section 856(c) (relating to limitations) as precedes paragraph (1) thereof is amended by striking out " A t r u s t or association" and inserting in lieu thereof " A corporation, trust, or association". (B) The second sentence of section 857(d) (relating to 26 USC 857. earnings and profits) is amended by striking out "a domestic unincorporated t r u s t " and inserting in lieu thereof "a domestic corporation, trust,". (g) INTEREST.—Section 856 (relating to definition of real estate investment trust) is amended by adding after subsection (e) the following new subsection: " (f) INTEREST.—For purposes of paragraph s (2)(B) and (3)(B) of "Interest." subsection (c), the term 'interest' does not include any amount received or accrued, directly or indirectly, if the determination of such amount depends in whole or in part on the income or profits of any person except that: " (1) any amount so received or accrued shall not be excluded from the term 'interest' solely by reason of being based on a fixed percentage or percentages of receipts or sales, and " (2) where a real estate investment t r u s t receives or accrues any amount which would be excluded from the term 'interest'

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 90 STAT. 1752

PUBLIC LAW 94-455—OCT. 4, 1976

solely because the debtor of the real estate investment trust receives or accrues any amount the determination of which depends in whole or in part on the income or profits of any person, only a proportionate part (determined pursuant to regulations prescribed by the Secretary) of the amount received or accrued by the real estate investment trust from such debtor will be excluded from the term 'interest'. The provisions of this subsection shall apply only with respect to amounts received or accrued pursuant to loans made after May 27, 1976. For purposes of the preceding sentence, a loan is considered to be made before May 28, 1976, if such loan is made pursuant to a binding commitment entered into before May 28, 1976." (h) CERTAIN DIVIDENDS.—The first sentence of section 858(a) (relating to dividends paid by real estate investment trust after close of taxable year) is amended— (1) by inserting "(and specifies in dollar amounts)" after "to the extent the trust elects in such return", and (2) by striking out "paid during such taxable year" and inserting in lieu thereof "paid only during such taxable year".

26 USC 858.

(i) ADOPTION or ANNUAL ACCOUNTING PERIOD.—

(1) Part II of subchapter M of chapter 1 (relating to real estate investment trusts) is amended by adding at the end thereof the following new section: 26 USC 860.

"SEC. 860. ADOPTION OF ANNUAL ACCOUNTING PERIOD.

"For purposes of this subtitle, a real estate investment trust shall not change to or adopt any annual accounting period other than the calendar year." (2) The table of sections for such part II is amended by adding at the end thereof the following: " ' 26 USC 857.

"Sec. 860, Adoption of annual accounting period." (j) CHANGE I N DISTRIBUTION REQUIREMENTS.—Section 857(a)(1)

• '

•'•''':

'

'^"'^" •' Ante, p. 1745.

(relating to requirements applicable to real estate investment trusts) is amended to read as follows: "(1) the deduction for dividends paid during the taxable year (as defined in section 561, but determined without regard to capital gains dividends) equals or exceeds— "(A) the sum of— "(i) 95 percent (90 percent for taxable years beginning before January 1, 1980) of the real estate investment trust taxable income for the taxable year (determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain); and "(ii) 95 percent (90 percent for taxable years begining before January 1, 1980) of the excess of the net income from foreclosure property over the tax imposed on such income by subsection (b)(4)(A); minus " (B) the sum of— "(i) the amount of any penalty imposed on the real estate investment trust by section 6697 which is paid by such trust during the taxable year; and " (ii) the net loss derived from prohibited transactions, and", (k) MANNER AND EFFECT OF TERMINATION OR REVOCATION OF ELECTION.—

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1753

(1) IN GENERAL.—Section 856 (relating to definition of real 26 USC 856. estate investment trust) is amended by adding after subsection (f) (as added by section 1604(g) of this Act) the following new subsection: "(g)

TERMINATION OF ELECTION.— " (1) FAILURE TO QUALIEY.—An election

under subsection (c)(1) made by a corporation, trust, or association shall terminate if the corporation, trust, or association is not a real estate investment trust to which the provisions of this part apply for the taxable year with respect to which the election is made, or for any succeeding taxable year. Such termination shall be effective for the taxable year for which the corporation, trust, or association is not a real estate investment trust to which the provisions of this part apply, and for all succeeding taxable years. "(2) REVOCATION.—An election under subsection (c)(1) made by a corporation, trust, or association may be revoked by it for any taxable year after the first taxable year for which the election is effective. A revocation under this paragraph shall be effective for the taxable year in which made and for all succeeding taxable years. Such revocation must be made on or before the 90th day after the first day of the first taxable year for which the revocation is to be effective. Such revocation shall be made in such Regulations, manner as the Secretary shall prescribe by regulations. "(3)

ELECTION AFTER TERMINATION OR REVOCATION.—Except as

provided in paragraph (4), if a corporation, trust, or association has made an election under subsection (c)(1) and such election has been terminated or revoked under paragraph (1) or paragraph (2), such corporation, trust, or association (and any successor corporation, trust, or association) shall not be eligible to make an election under subsection (c)(1) for any taxable year prior to the fifth taxable year which begins after the first taxable year for which such termination or revocation is effective. "(4) EXCEPTION.—If the election of a corporation, trust, or association has been terminated under paragraph (1), paragraph (3) shall not apply if— " (A) the corporation, trust, or association does not willfully fail to file within the time prescribed by law an income tax return for the taxable year with respect to which thei termination of the election under subsection (c)(1) occurs; "(B) the inclusion of any incorrect information in the return referred to in subparagraph (A) is not due to fraud with intent to evade tax; and "(C) the corporation, trust, or association establishes to the satisfaction of the Secretary that its failure to qualify as a real estate investment trust to which the provisions of this part apply is due to reasonable cause and not due to willful neglect."

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,. j ^y.

,

(2) CONFORMING AMENDMENTS.—

(A) Section 856(c)(1) (relating to limitations) is amended by striking out the semicolon at the end and inserting in lieu thereof ", and such election has not been terminated or revoked under subsection (g);". (B) Section 857(a) (relating to requirements applicable to real 26 USC 857. estate investment trust) is amended by striking out "(other than subsection (d) of this section)" and inserting in lieu thereof "(other than subsection (d) of this section and subsection (g) of section 856)".

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 90 STAT. 1754

PUBLIC LAW 94-455—OCT. 4, 1976

.;:^t^.... ^

SEC. 1605. EXCISE TAX. ,....,..,.„»...i / i \ (a) IMPOSITION OF TAX.—Subtitle D (relating to miscellaneous excise taxes) is amended by a d d i n g at the end thereof the following new chapter:

"CHAPTER 44—REAL ESTATE INVESTMENT TRUSTS 26 USC 4981.

"Sec. 4981. Excise tax based on certain real estate investment trust taxable income not distributed during the taxable year. "SEC. 4981. E X a S E TAX BASED ON CERTAIN REAL ESTATE INVESTMENT TRUST TAXABLE INCOME NOT DISTRIBUTED DURING THE TAXABLE YEAR. "Effective with respect to taxable years beginning after December 31, 1979, there is hereby imposed on each real estate investment t r u s t for the taxable year a tax equal to 3 percent of the amount (if any) by which 75 percent of the real estate investment t r u s t taxable income (as defined in section 8 5 7 (b)(2), b u t determined without regard to section 857(b)(2)(B), and by excluding any net capital gain for the taxable year) exceeds the amount of the dividends paid deduction (as defined in section 561, but computed without regard to capital gains dividends as defined in section 8 5 7 (b)(3)(C) and without regard to any dividend paid after the close of the taxable year) for the taxable year. For purposes of the preceding sentence, the determination of the real estate investment t r u s t taxable income shall be made by taking into account only the amount and character of the items of income and deduction as reported by such t r u s t i n its r e t u r n for the taxable year." (b)

26 USC 275.

26 USC 857.

(1) Paragraph (6) of section 275(a) (relating to denial of deduction for certain taxes) is amended by striking out " and chapter 43." and inserting in lieu thereof ", chapter 43, and chapter 44." (2) Section 857 (relating to taxation of real estate investment trusts and their beneficiaries) is amended by a d d i n g at the end thereof the following new subsection: "(e)

26 USC 6161.

26 USC 6211.

i' 26 USC 6212.

TECHNICAL AMENDMENTS.—

CROSS R E F E R E N C E. —

"For provisions relating to excise tax based on certain real estate investment trust taxable income not distributed during the taxable year, see section 4981." (3) Section 6161(b)(1) relating to extensions of time for payment of tax), as amended by this Act, is amended by striking out "42 or 4 3 " and inserting in lieu thereof "42, 43, or 44". The second sentence of section 6161(b) is amended by striking out " o r chapter 4 3 " and inserting in lieu thereof "43, or 44". (4) Section 6211 (defining deficiency) is amended— (A) by s t r i k m g out " and 4 3 " in subsection (a) and inserting in lieu thereof "43, and 44", (B) by striking out "or 4 3 " in subsection (a) and inserting in lieu thereof "43, or 44", and (C) by striking out "or 4 3 " in subsection (b)(2) and inserting in lieu thereof "43, or 44". (5) Section 6212 (relating to notice of deficiency) is amended— (A) by striking out "or 4 3 " in subsection (a) and insert„=, i n g in lieu thereof "43, or 44",

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 PUBLIC LAW 94-455—OCT. 4, 1976 .,:,

90 STAT. 1755

(B) by striking out "or chapter 43" in subsection (b)(1) and inserting in lieu thereof "chapter 43, or chapter 44", (C) by striking out "chapter 43, and this chapter" in subsection (b)(1) and inserting in lieu thereof "chapter 43, chapter 44, and this chapter", and (D) by striking out "of chapter 43 tax for the same taxable years," in subsection (c)(1) and inserting in lieu thereof "of chapter 43 tax for the same taxable years, of chapter 44 tax for the same taxable years,". (6) Section 6213(a) (relating to restrictions applicable to deficiencies and petition to Tax Court) is amended by striking out "or 43" and inserting in lieu thereof "43, or 44". (7) Section 6214 (relating to determinations by Tax Court) is amended— (A) by striking out "or 43" in the heading of subsection (c) and inserting in lieu thereof "43, or 44", and (B) by striking out "or 43" each place it appears in subsection (c) and inserting in lieu thereof "43, or 44", and (C) by striking out "or 43" in subsection (d) and inserting in lieu thereof "43, or 44". (8) Section 6344(a)(1) (relating to cross references) is amended by striking out "or 43" and inserting in lieu thereof "43,

26 USC 4971, ^ ^"^' P- ^'^^^

26 USC 6213. 26 USC 6214.

26 USC 6344.

or 44".

(9) Section 6512 (relating to limitations in case of petition to 26 USC 6512. Tax Court) is amended by striking out "or 43" each place it appears and inserting in lieu thereof "43, or 44". (10) Section 6601(c) (relating to suspension of interest in cer- 26 USC 6601. tain income, etc. tax cases) is amended by striking out in the heading thereof "or 43" and inserting in lieu thereof "43, or 44". (11) Section 7422 (relating to civil actions for refund) is 26 USC 7422. amended by striking out "or 43" in subsection (e) and inserting in lieu thereof "43, or 44". (c) CLERICAL AMENDMENT.—The table of chapters for subtitle D is amended by adding at the end thereof the following: "Chapter 44. Real estate investment trusts." SEC. 1606. ALLOWANCE OF NET OPERATING LOSS CARRYOVER. (a) ALLOWANCE OF DEDUCTION.—Section 857(b)(2) (relating to 26 USC 857.

real estate investment trust taxable income) is amended by striking out subparagraph (E) and by redesignating subparagraph (F) as subparagraph (D). (b) YEARS TO W H I C H LOSS MAY B E CARRIED.—Section 172(b)(1)

26 USC 172.

(relating to years to which a net operating loss may be carried) is amended by inserting after subparagraph (D) thereof the following: " (E) In the case of a taxpayer which has a net operating loss for any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to such taxpayer, such loss shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss and shall be a net operating loss carryover to ' '* each of the 8 taxable years following the taxable year of such loss, except, in the case of a net operating loss for a taxable year ending before January 1, 1976, such loss shall not be carried to the 6th, 7th, or 8th taxable year following the taxable year of such loss unless part II of subchapter M applied to the 26 USC 856. taxpayer for the taxable year to which the loss is carried and for all intervening taxable years following the year of loss.

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 90 STAT, 1756

PUBLIC LAW 94-455—OCT. 4, 1976 A net operating loss shall not be carried back to a taxable year for which part II of subchapter M applied to the taxpayer."

26 USC 856. (c)

26 USC 172.

DETERMINATION or THE AMOUNT OF THE NET OPERATING LOSS

AND THE CARRYOVER.—Section 172(d) (relating to modifications in computing net operating loss) is amended by adding a new paragraph (7) at the end thereof, to read as follows: " (7) In the case of any taxable year for which part II of subchapter M (relating to real estate investment trusts) applies to the taxpayer— "(A) the net operating loss for such taxable year shall be computed by taking into account the adjustments described in section 857(b)(2) (other than the deduction for dividends paid described in section 857(b)(2)(B)); and "(B) where such taxable year is a 'prior taxable year' referred to in paragraph (2) of subsection (b), the term 'taxable income' in such paragraph shall mean 'real estate investment trust taxable income' (as defined in section 857 (b)(2))." (d) CONFORMING AMENDMENT.—Subparagraph (B) of section 857

26 USC 857.

26 USC 857.

(b)(2) (relating to real estate investment trust taxable income), as redesignated by section 1607(b) of this Act, is amended by striking out "subparagraph (F) " and inserting in lieu thereof "subparagraph (D)". SEC. 1607. ALTERNATIVE TAX IN CASE OF CAPITAL GAINS. (a) ALTERNATIVE TAX.—Section 857(b)(3)(A) (relating to imposition of tax on capital gain) is amended to read as follows: "(A)

ALTERNATIVE TAX IN CASE OF CAPITAL GAINS.—If for

any taxable year a real estate investment trust has a net capital gain, then, in lieu of the tax imposed by subsection (b)(1), there is hereby imposed a tax (if such tax is less than the tax imposed by such subsection) which shall consist of the sum of— " (i) a tax, computed as provided in subsection (b)(1), on the real estate investment trust taxable income (determined by excluding such net capital gain and by computing the deduction for dividends paid without regard to capital gain dividends), and " (ii) a tax of 30 percent of the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gains dividends only." (b)

26 USC 46.

CONFORMING AMENDMENTS.—

(1)(A) Section 857(b)(2) (relating to method of taxation of real estate investment trust taxable income) is amended by deleting subparagraph (A) and redesignating subparagraphs (B), (C), and (D) as subparagraphs (A), (B), and (C), respectively. (B) Subsection (e)(2) of section 46 (relating to investment credit) is amended— (i) by striking out "857(b)(2)(C) " in subparagraph (B) and inserting in lieu thereof "857(b)(2)(B)", and (ii) by inserting "determined without regard to any deduction for capital gains dividends (as defined in section 857(b)(3)(C)) and by excluding any net capital gain" immediately before the period at the end of the last sentence thereof.

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 PUBLIC LAW 94^55—OCT. 4, 1976

90 STAT. 1757

(C) Section 443(e)(6) (relating to cross references) is amended by striking out " 8 5 7 (b)(2)(D) " and inserting i n lieu thereof "857(b)(2)(C)''. (2) Subparagraph (B) of section 857(b)(2) (relating to real estate investment trust taxable income), as redesignated by paragraph (1) of this subsection, is amended by striking out "shall be computed without regard to capital gains dividends and". (3) Section 8 5 7 (b)(3)(C) (relating to definition of capital gain dividend) is amended by inserting after the second sentence thereof the following: " For purposes of this subparagraph, the net capital gain shall be deemed not to exceed the real estate investment trust taxable income (determined without regard to the deduction for dividends paid (as defined i n section 561) for the taxable year). " SEC. 1608. EFFECTIVE DATE FOR TITLE. (a) DEriciENCY DIVIDEND PROCEDURES.—The amendments made by section 1601 shall apply with respect to determinations (as defined in section 859(c) of the I n t e r n a l Revenue Code of 1954) occurring after the date of the enactment of this Act. I f the amendments made by section 1601 apply to a taxable year ending on or before the date of enactment of this Act: (1) the reference to section 857(b)(3)(A) (ii) i n sections 8 5 7 (b)(3)(C) and 8 5 9 (b)(1)(B) of such Code, as amended, shall be considered to be a reference to section 857(b)(3)(A) of such Code, as in effect immediately before the enactment of this Act, and (2) the reference to section 8 5 7 (b)(2)(B) i n section 859(a) of such Code, as amended, shall be considered to be a reference to section 857(b)(2)(C) of such Code, as in effect immediately before the enactment of this Act. (b) T R U S T N O T DISQUALIFIED I N CERTAIN CASES W H E R E INCOME

26 USC 443. 26 USC 857.

> •'{ •^*'"'^~ '.,,•' 26 USC 859 "o*®Ante, p. 1742.

26 USC 856

TESTS N O T M E T. — The amendment made by section 1602 shall apply to ° * ® of the enactment of this Act. I n addition, the amendments made by section 1602 shall apply to a taxable year of a real estate investment t r u s t beginning before the date of the enactment of this Act if, as the result of a determination (as defined in section 859(c) of the I n t e r n a l Revenue Code of 1954) with respect to such t r u s t occurring after the date of the enactment of this Act, such t r u s t for such taxable years does not meet the requirements of section 8 5 6 (c)(2) or section 856 (c)(3), or of both such sections, of such Code as i n effect for such taxable year. I n any case, the amendment made by section 1602(a) requiring a schedule to be attached to the income tax return of certain real estate investment trusts shall apply only to taxable years of such trusts beginning after the date of the enactment of this Act. I f the amendments made by section 1602 apply to a taxable year ending on or before the date of enactment of this Act, the reference to paragraph (2)(B) in section 857(b)(5) of such Code, as amended, shall be con- Ante, p. 1747. sidered to be a reference to paragraph (2)(C) of section 857(b) of such Code, as in effect immediately before the enactment of this Act. (c) ALTERATIVE T A X AND N"ET OPERATING Loss.—The amendments
 * taxable years of real estate investment trusts beginning after the date

made by sections 1606 and 1607 shall apply to taxable years ending after the date of the enactment of this Act, except that i n the case of a tax p a y e r which has a net operating loss (as defined i n section 172(c) of the I n t e r n a l Revenue CcKle of 1954) for any taxable year ending after the date of enactment of this Act for which the provisions of

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 90 STAT. 1758 26 USC 856.

part II of subchapter M of chapter 1 of subtitle A of such Code apply to such taxpayer, such loss shall not be a net operating loss carryback under section 172 of such Code to any taxable year ending on or before the date of enactment of this Act.

26 USC 856

((J) OTHER AMENDMENTS.—

°***®-

Ante, p. 1742. Ante, p. 1751.

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,

,

"

PUBLIC LAW 94-455—OCT. 4, 1976

(1) Except as provided in paragraphs (2) and (3), the amendments made by sections 1603, 1604, and 1605 shall apply to taxable years of real estate investment trusts beginning after the date of the enactment of this Act. (2) If, as a result of a determination (as defined in section 859(c) of the Internal Revenue Code of 1954), occurring after the date of enactment of this Act, with respect to the real estate investment trust, such trust does not meet the requirement of section 856(a)(4) of the Internal Revenue Code of 1954 (as in effect before the amendment of such section by this Act) for any taxable year beginning on or before the date of the enactment of this Act, such trust may elect, within 60 days after such determination in the manner provided in regulations prescribed by the Secretary of the Treasury or his delegate, to have the provisions of section 1603 (other than paragraphs (1), (2), (3), and (4) of section 1603(c)) apply with respect to such taxable year. Where the provisions of section 1603 apply to a real estate investment trust with respect to any taxable year beginning on or before the date of the enactment of this Act— (A) credit or refund of any overpayment of tax which results from the application oi section 1603 to such taxable year shall be made as if on the date of the determination (as defined in section 859(c) of the Internal Revenue Code of 1954) 2 years remained before the expiration of the period of limitation prescribed by section 6511 of such Cocfe on the filing of claim for refund for the taxable year to which the overpayment relates, (B) the running of the statute of limitations provided in section 6501 of such Code on the making of assessments, and the bringing of distraint or a proceeding in court for collection, in respect of any deficiency (as defined in section 6211 of such Code) established by such a determination, and all interest, additions to tax, additional amounts, or assessable penalties in respect thereof, shall be suspended for a period of 2 years after the date of such determination, and (C) the collection of any deficiency (as defined in section 6211 of such Code) established by such determination and all interest, additions to tax, additional amounts, and assessable penalties in respect thereof shall, except in cases of jeopardy, be stayed until the expiration of 60 days after the date of such determination. No distraint or proceeding in court shall be begun for the collection of an amount the collection of which is stayed under subparagraph (C) during the period for which the collection of such amount is stayed. (3) Section 856(g)(3) of the Internal Revenue Code of 1954, as added by section 1604 of this Act, shall not apply with respect to a termination of an election, filed by a taxpayer under section 856(c)(1) of such Code on or before the date of the enactment of this Act, unless the provisions of part II of subchapter M of chapter 1 of subtitle A of such Code apply to such taxpayer for a taxable year ending after the date of the enactment of this Act for which such election is in effect.

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 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1759

TITLE XVII—RAILROAD AND AIRLINE PROVISIONS SEC. 1701. CERTAIN PROVISIONS RELATING TO RAILROADS. (a) TREATMENT OF CERTAIN KAIUIOAD T I E S. — S e c t i o n 263 ( r e l a t i n g

to capital expenditures) is amended by a d d i n g a t the end thereof the following new subsection: " (g) RAILROAD T I E S. — I n the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material ( and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood ( and fastenings related to such t i e s). " (b) INCREASE I N 5 0 - P E R C E N T LIMITATION.—Subsection (a) of section

46 (relating to determination of amount of investment credit) is amended by a d d i n g a t the end thereof the following new paragraph: "(8) ALTERNATIVE RAILROADS.—

LIMITATION

IN

THE CASE

OF CERTAIN

" (A) IN GENERAL.—If, for a taxable year ending after calendar year 1976, and before calendar year 1983, the amount of the qualified investment of the taxpayer which is attributable to railroad property is 25 percent or more of his aggregate qualified investment, the n subparagraph (C) of paragraph (3) of this subsection shall be applied by substituting for 50 percent his applicable percentage for such year. " (B) APPLICABLE PERCENTAGE.—The applicable percentage

of any tax p a y e r for any taxable year under this paragraph is— " (i) 50 percent, plus " ( i i) that portion of the tentative percentage for the taxable year which the taxpayer's amount of qualified investment which is railroad property bears to his aggregate qualified investment. If the proportion referred to m clause (ii) is 75 percent or more, the applicable percentage of the taxpayer for the year shall be 50 percent plus the tentative percentage for such year. "(C)

TENTATIVE PERCENTAGE.—For purposes of s u b p a r a -

g r a p h (B), the tentative percentage shall be determined under the following t a b l e: "If the taxable The tentative year ends in: percentage is: 1977 or 1978 50 1979 40 1980 30 1981 20 1982 10 "(D)

RAILROAD PROPERTY DEFINED.—For purposes of t h i s

paragraph, the term 'railroad property' means section 38 property used by the taxpayer directly in connection with the trade or business carried on by the tax p a y e r of operating a railroad (including a railroad switching o r terminal company)."

26 USC 263.

---.jr"; ,..-^

^

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 90 STAT. 1760

PUBLIC LAW 94-455—OCT. 4, 1976 SEC. 1702. AMORTIZATION OVER 50-YEAR PERIOD OF RAILROAD GRADING AND TUNNEL BORES PLACED IN SERVICE BEFORE 1969.

26 USC 185.

(a) IN GENERAL.—Section 185 (relating to amortization of railroad grading and tunnel bores) is amended by redesignating subsections (d), (e), (f), (g), and (h) as subsections (f), (g), (h), (i),and (j), respectively, and by inserting after subsection (c) the following new subsections: " (d) ELECTION W I T H RESPECT TO PRE-1969 PROPERTY.—^A taxpayer

Filing requirement.

may, lor any taxable year beginning a:^er December 31, 1974, elect for purposes of this section to treat the term 'qualified railroad grading and tunnel bores' as including pre-1969 railroad grading and tunnel bores. An election under this subsection shall be made by filing with I\^Q Secretary, in such manner, in such form, and within such time, as the Secretary may by regulations prescribe, a statement of such election. The election under this subsection shall remain in effect for all taxable years, after the first year for which it is effective, for which an election under subsection (c) is effective. The election under this subsection shall apply to all pre-1969 railroad grading and tunnel bores of the taxpayer, unless, on application by the taxpayer, the Secretary permits him, subject to such conditions as the Secretary deems necessary, to revoke such election. "(e) ADJUSTED BASIS FOR PRE-1969 RAILROAD GRADING AND TUNNEL BORES.—

" (1) IN GENERAL.—The adjusted basis of any pre-1969 railroad grading and tunnel bore shall be determined under this subsection. " (2) PROPERTY ACQUIRED OR CONSTRUCTED AFTER FEBRUARY 28, 1913.—

"(A) In the case of pre-1969 railroad grading and tunnel bores— " (i) acquired by the taxpayer after February 28, 1913, or "(ii) the construction of which was completed by the taxpayer after February 28, 1913, the adjusted basis of such property shall be equal to the adjusted basis (for determining gam) of such property in the hands of the taxpayer. " (B) In the case of property described in subparagraph (A)(i)"(i) which was in existence on February 28, 1913, "(ii) for which the taxpayer has a substituted basis, and "(iii) such substituted basis for which would, but for the provisions of this section, be determined under section 1053, then the adjusted basis of such property shall be determined as if such property were property described in paragraph (3)(A). "(3) PROPERTY ACQUIRED OR CONSTRUCTED BEFORE MARCH i, 1913.—

" (A) In the case of pre-1969 railroad grading and tunnel bores— i) acquired by the taxpayer before March 1, 1913, or ii) "(ii) the construction of which was completed by the taxpayer before March 1, 1913,

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1761

the adjusted basis of such property shall be determined under the provisions of subparagraph (B), (C), or (D) of this paragraph. "(B) In the case of any property valued under an original valuation made by the Interstate Commerce Commission pursuant to section 19a of part I of the Interstate Commerce Act (49 U.S.C. 19a), the adjusted basis of such property shall be equal to the amount ascertained by the Interstate Commerce Commission as of the date of such valuation to be such property's cost of reproduction new (as the term 'cost of reproduction new' is used in such section 19a). "(C) In the case of property which was not valued by the Interstate Commerce Commission in the manner described in subparagraph (B), but which was valued under an original valuation made by a comparable State regulatory body, the adjusted basis of such property shall be equal to the amount ascertained by such State regulatory body as of the date of its original valuation to be such property's value. " (D) If, in the case of any property to which this paragraph applies— "(i) neither subparagraph (B) nor (C) applies, or "(ii) notwithstanding subparagraphs (B) and (C), either the taxpayer or the Secretary can establish the adjusted basis (for purposes of determining gain) of such property in the hands of the taxpayer, then the adjusted basis of such property shall be equal to its adjusted basis (for purposes of determining gain) in the hands of the taxpayer." (b)

DEFiNmoN OF PRE-1969 RAILROAD GRADING AND TUNNEL

BORES.—Subsection (f) of section 185 (as redesignated by subsection (a) of this section) is amended by adding at the end thereof the following new paragraph: "(3)

26 USC 185.

PRE-1969 RAILROAD GRADING AND TUNNEL BORES.—The

term 'pre-1969 railroad grading and tunnel bores' means railroad grading and tunnel bores the original use of which commences before January 1, 1969.". SEC. 1703. CERTAIN PROVISIONS RELATING TO AIRLINES. Subsection (a) of section 46 (relating to determination of amount of investment credit) is amended by adding at the end thereof the following new paragraph: "(9) ALTERNATIVE AIRLINES

LIMITATION

IN

26 USC 46.

THE CASE OF CERTAIN

"(A) IN GENERAL.—If, for a taxable year ending after calendar year 1976 and before calendar year 1983, the amount of the qualified investment of the taxpayer which is attributable to airline property is 25 percent or more of his aggregate qualified investment, then subparagraph (C) of paragraph (3) of this subsection shall be applied by substituting for 50 percent his applicable percentage for such year. " (B) APPLICABLE PERCENTAGE.—The applicable percentage of any taxpayer for any taxable year under this paragraph is— "(i) 50 percent, plus "(ii) that portion of the tentative percentage for the taxable year which the taxpayer's amount of qualified

^.

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 90 STAT. 1762

-

PUBLIC LAW 94-455—OCT. 4, 1976 investment which is airline property bears to his aggregate qualified investment. If the proportion referred to in clause (ii) is 75 percent or more, the applicable percentage of the taxpayer for the year shall be 50 percent plus the tentative percentage for such year. " (C) TENTATIVE PERCENTAGE.—For purposes of subparagraph (B), the tentative percentage shall be determined under the following table: "If the taxable The tentative year ends in: percentage is; 1977 or 1978 50 1979 1980 1981

40 30 20

1982 10 "(D) AIRLINE PROPERTY DEFINED.—For purposes of this paragraph, the term 'airline property' means section 38 property used by the taxpayer directly in connection with the trade or business carried on by the taxpayer of the furnishing or sale of transportation as a common carrier by air subject to the jurisdiction of the Civil Aeronautics Board or the Federal Aviation Administration."

TITLE XVIII—INTERNATIONAL TRADE AMENDMENTS SEC. 1801. UNITED STATES INTERNATIONAL TRADE COMMISSION. (a) TERMS OP OFFICE.—The last sentence of section 330(b) of the Tariff Act of 1930 (19 U.S.C. 1330 (b)) is amended to read as follows: "The term of office of each commissioner appointed after such date shall expire 9 years from the date of the expiration of the term for which his predecessor was appointed, except that— "(1) any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and " (2) any commissioner may continue to serve as a commissioner after an expiration of his term of office until his successor is appointed and qualified." 19 USC 1330.

19 USC 2251.

19 USC 2436.

(b) VOTING PROCEDURES.—Section 330(d) of the Tariff Act of 1930

is amended by— (1) redesignating paragraph (2) as paragraph (5); and (2) striking out paragraph (1) and inserting in lieu thereof the following new paragraphs: "(1) In a proceeding in which the Commission is required to determine— " (A) under section 201 of the Trade Act of 1974, whether increased imports of an article are a substantial cause of serious injury, or the threat thereof, as described in subsection (b)(1) of that section (hereafter in this subsection referred to as 'serious injury'), or " (B) under section 406 of such Act, whether market disruption exists, and the commissioners voting are equally divided with respect to such determination, then the determination agreed upon by

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 PUBLIC LAW 94-455—OCT. 4, 1976 either group of commissioners m&j be considered by the President as the determination of the Commission. " (2) If under section 201 or 406 of the Trade Act of 1974 there is an affirmative determination of the Commission, or a determination of the Commission which the President may consider an affirmative determination under paragraph (1), that serious injury or market disruption exists, respectively, and a majority of the commissioners voting are unable to agree on a finding or recommendation described in section 201(d)(1) of such Act or the finding described in section 406(a)(3) of such Act, as the case may be (hereafter in this subsection referred to as a 'remedy finding'), then— "(A) if a plurality of not less than three commissioners so voting agree on a remedy finding, such remedy finding shall, for purposes of sections 202 and 203 of such Act, be treated as the remedy finding of the Commission, or " (B) if two groups, both of which include not less than 3 commissioners, each agree upon a remedy finding and the President reports under section 203(b) of such Act that— "(i) he is taking the action agreed upon by one such group, then the remedy finding agreed upon by the other group shall, for purposes of sections 202 and 203 of such Act, be treated as the remedy finding of the Commission, or "(ii) he is taking action which differs from the action agreed upon by both such groups, or that he will not take any action, then the remedy finding agreed upon by either such group may be considered by the Congress as the remedy finding of the Commission and shall, for purposes of sections 202 and 203 of such Act, be treated as the remedy finding of the Commission. "(3) In any proceeding to which paragraph (1) applies in which the commissioners voting are equally divided on a determination that serious injury exists, or that market disruption exists, the Commission shall report to the President the determination of each group of commissioners. In any proceeding to which paragraph (2) applies, the Commission shall report to the President the remedy finding of each group of commissioners voting. "(4) In a case to which paragraph (2)(B)(ii) applies, for purposes of section 203(c)(1) of the Trade Act of 1974, notwithstanding section 152(a)(1)(A) of such Act, the second blank space in the concurrent resolution described in such section 162 shall be filled with the appropriate date and the following: 'The action which shall take effect under section 203(c)(1) of the Trade Act of 1974 is the finding or recommendation agreed upon by Commissioners, , and .' The three blank spaces shall be filled with the names of the appropriate Commissioners." (c) EFFECTTVE DATE.—The amendments made by subsection (b) shall apply to determinations, findings, and recommendations made under sections 201 and 406 of the Trade Act of 1974 after the date of the enactment of this Act. SEC. 1802. TRADE ACT OF 1974 AMENDMENTS. Section 502(b) of the Trade Act of 1974 (Public Law 93-618; 88 Stat. 1978) is amended— (1) by striking out "and" at the end of paragraph (6),

90 STAT. 1763

19 USC 2251, 2436.

19 USC 2252, 2253.

Congressional consideration.

Report to President.

19 USC 2253. 19 USC 2192.

19 USC 1330 note.

19 USC 2462.

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 90 STAT. 1764

.1

^

PUBLIC LAW 94-455—OCT. 4, 1976 (2) by striking out the period a t the end of paragraph (6) and inserting in lieu thereof "; and", (3) by inserting inmiediately after paragraph (6) the following new paragraph: " (7) if such country aids or abets, by g r a n t i n g sanctuary from prosecution to, any individual or group which has committed a n act of international terrorism."; and (4) by striking o u t "and (6) " i n the unnumbered paragraph at the end of such section and inserting in lieu thereof " (6), and

TITLE XIX—REPEAL AND REVISION OF OBSOLETE, RARELY USED, ETC., PROVISIONS OF INTERNAL REVENUE CODE OF 1954 SUBTITLE A—AMENDMENTS OF INTERNAL REVENUE CODE GENERALLY SEC. 1901. AMENDMENTS OF SUBTITLE A; INCOME TAXES. 26 USC 2.

(a) IN GENERAL.— (1) AMENDMENT OF SECTION 2.—Subsection (c) of section 2

(relating to certain married individuals living a part) i s amended to read as follows: " (c) CERTAIN MARRIED INDIVIDUALS LIVING A P A R T. — For purposes

of this part, a n individual shall be treated as not married a t the close of the taxable year if such individual is so treated under the provisions of section 143(b). " 26 USC 35.

(2) E E P E A L OF SECTION 35.—Section 35 ( r e l a t i n g to partial l y

tax-exempt interest received by individuals) is repealed. 26 USC 39.

(3) AMENDMENT OF SECTION 39.—Section 39 ( r e l a t i n g to certain

uses of gasoline, special fuels, and lubricating oil) is amended by striking out subsections (b) and (c) and inserting after subsection (a) the following new subsection: " (b) EXCEPTION.—Credit shall not be allowed under subsection (a) for any amount payable under section 6421, 6424, or 6427, if a claim for such amount is timely filed and, under section 6421(i), 6424(f), or 6427(f), is payable under such section." (4) AMENDMENTS o r SECTION 46.—

26 USC 46.

(A) The second sentence of section 4 6 (a)(4), as redesignated by this Act, is amended by striking out "section 408(e) " and inserting in lieu thereof "section 4 0 8 (f) ". (B) Clause (iii) of section 46(c)(3)(B) (relating to public utility property) is amended by striking out "47 TJ.S.C, sec. 2 2 2 (a)(5) " and inserting in lieu thereof "47 U.S.C. 222(a)(5)". (5) AMENDMENTS o r SECTION 4 8.—

26 USC 48.

' " •'

(A) Section 48(a)(2)(B) (vi) (relating to section 38 property used outside the United States) is amended by striking out "; 43 U.S.C. sec. 1331)" and inserting in lieu thereof " (43 U.S.C. 1331))". (B) Section 48(a)(2)(B) (viii) is amended by strikinsr o^it "47 U.S.C. sec. 702" and inserting in lieu thereof "47 U. S. C 702".

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1765

(6) AMENDMENT OF SECTION 5OA.—The second sentence of sec-

tion 5 0 A (a)(3) (relating to liability for tax) is amended by striking o u t "section 408(e) " and inserting i n lieu thereof "section 408(f)". (7) REPEAL OF SECTION S I. — Subchapter A of chapter 1 is

amended by striking out part V (relating to tax surcharge). (8) AMENDMENTS OF SECTION 6 2.—Section 62 (relating to definition of adjusted gross income) is amended by redesignating paragraph ( 1 1), as added by the Act of October 26, 1974 (Public Law 93-483), as paragraph ( 1 2). (9) ADDITIONAL AMENDMENT OF SECTION 62.—Section 62(12), a s redesignated by subparagraph (A) of this paragraph, is amended by striking out " trade or business to the extent" and inserting i n lieu thereof " trade or business, to the extent".

26 USC 50A. 26 USC 51.

26 USC 62.

(10) DEFINITION OF ORDINARY I N C O M E. — Part I of subchapter B

of chapter 1 (relating to definitions of gross income, adjusted gross income, and taxable income) is amended by a d d i n g a t the end thereof the following new section: "SEC. 64. ORDINARY INCOME DEFINED. " For purposes of this subtitle, the term 'ordinary income' includes any gain from the sale or exchange of property which is neither a capital asset n o r property described i n section 1231(b). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as 'ordinary income' shall be t r e a t e d as gain from the sale or exchange of property which is neither a capital asset n o r property described in section 1231(b)."

26 USC 61.

26 USC 64.

'

'•

(11) DEFINITION OF ORDINARY LOSS.—Part I of subchapter B of

chapter 1 (relating to definitions of gross income, adjusted gross income, and taxable income) is amended by a d d i n g a t the end thereof the following new section: "SEC. 65. ORDINARY LOSS DEFINED. " For purposes of this subtitle, the term 'ordinary loss' includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as 'ordinary loss' shall be treated as loss from the sale or exchange of property which is not a capital asset." (12) AMENDMENT OF SECTION 72.—Section 7 2 (d)(1) ( r e l a t i n g

26 USC 61.

26 USC 65.

26 USC 72.

to employees' annuities) is amended by striking out " ( w h e the r or not before January 1, 1954)" and by striking o u t " ( under t h i s paragraph and p r i o r income tax laws) ". (13) ADDITIONAL AMENDMENT o r SECTION 72.—Section 7 2 (m)

(4)(A) (relating to assignments o r pledges) is amended by striking out " a n individual retirement a m o u n t " and inserting in lieu thereof " a n individual retirement account". (14) REPEAL OF SECTION 7 6.—Section 76 (relating to mortgages made or obligations issued by joint stock land banks) is repealed. (15) AMENDMENT OF SECTION 8 3.—Section 83(b)(2) ( r e l a t i n g

to election to include the value of restricted property i n gross income) is amended by striking out " ( o r, if later, 30 days after the date of the enactment of the T a x Reform Act of 1969)". (16) AMENDMENT OF SECTION 101.—Section 101 is amended by

2^ j,cp 7A 26 USC 83.

26 USC 1 note, 26 USC 101.

striking out subsection (f) (relating to effective date of section). ( 1 7) AMENDMENTS OF SECTION 1 0 3. —

(A) Section 103(a) (relating to tax-exempt interest), as amended by this Act, is amended by inserting " and " a t the

26 USC 103.

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 9 0 STAT. 1766

PUBLIC LAW-94-455—OCT. 4, 1976 end of paragraph (1), by striking out paragraph s (2) and (3), and by redesignating paragraph (4) as paragraph (2). (B) Section 103 is amended by striking out subsection (b) (relating to certain exceptions) and by redesignating subsections (c), (d), (e), (f), and (g) (as added by this Act) as subsections (b), (c), (d), (e), and (f) respectively. (C) Section 1 0 3 (b)(1) (relating to industrial development b o n d s), as redesignated by subparagraph (B) of this paragraph, is amended by inserting "or (2) " after " (a)(1) ". (D) Section 103(c)(2)(A) (relating to definition of arbitrage bonds), as redesignated by subparagraph (B) of this paragraph, is amended by inserting "or (2) " after " (a)(1) ". (E) Section 103(e) (relating to certain cross references) as redesignated by subparagraph (B) of this paragraph, is amended to read as follows:

26 USC 103.

- '

"(e)

CROSS REFERENCES.—

"For provisions relating to the taxable status of— "(1) Puerto Rican bonds, see section 3 of the Act of March 2, 1917, as amended (48 U.S.C. 745). "(2) Virgin Islands insular and municipal bonds, see section 1 of the Act of October 27, 1919 (48 U.S.C. 1403). "(3) Certain obligations issued under title I of the Housing Act of 1949, see section 102(g) of title I of such Act (42 U.S.C. 1452(g)).'' (18)

26 USC 104.

Ante, p. 1567.

26 USC 115.

AMENDMENTS OF SECTION I O 4. —

(A) Section 1 0 4 (a)(4) (relating to exclusion of compensation for injuries or sickness) is amended by striking out "; 60 Stat. 1021". (B) Section 104(c)(2) as redesignated by section 505 of ^j^-g ^^^^ -g amended to read as follows: "(2) For exclusion of part of disability retirement pay from the application of subsection (a)(4) of this section, see section 1403 of title 10, United States Code (relating to career compensation laws)." (19)

AMENDMENT or SECTION l i s. — S e c t i o n 115 ( r e l a t i n g to

income of States, municipalities, etc.) is amended to read as follows: "SEC. 115. INCOME OF STATES, MUNICIPALITIES, ETC. "Gross income does not include— " (1) income derived from any public utility o r the exercise of any essential governmental function and accruing to a State or any political subdivision thereof, o r the District of Columbia; or " (2) income accruing to the government of any possession of the United States, or any political subdivision thereof." ^^^^ AMENDMENT or SECTION H 6. — S u b s e c t i o n (a) of section

26 Use 116.

26 USC 124.

-j^ji^g (relating to partial exclusion of dividends received by individuals) is amended by striking out "Effective with respect to any taxable year ending after July 31, 1954, gross income" and inserting in lieu thereof "Gross income". (21)

AMENDMENT OF SECTION 124.—Section 124 (relating to

cross references to other Acts) is amended to read as follows: "SEC. 124. CROSS REFERENCES TO OTHER ACTS, "(a) For exemption of— "(1) Adjustments of indebtedness under wage earners' plans, see section 679 of the Bankruptcy Act (11 U.S.C. 1079). "(2) Allowances and expenditures to meet losses sustained by persons serving the United States abroad, due to appreciation of foreign currencies, see section 5943 of title 5, United States Code.

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90 STAT. 1767

"(3) Amounts credited to the Maritime Administration under section 9(b)(6) of the Merchant Ship Sales Act of 1946, see section 9(c)(1) of that Act (50 U.S.C. App. 1742). "(4) Benefits under laws administered by the Veterans' Administration, see section 3101 of title 38, United States Code. "(5) Earnings of ship contractors deposited in special reserve funds, see section 607(d) of the Merchant Marine Act, 1936 (46 U.S.C. 1177). "(6) Income derived from Federal Reserve banks, including capital stock and surplus, see section 7 of the Federal Reserve Act (12 U.S.C. 531). "(7) Railroad retirement annuities and pensions, see section 12 of the Railroad Retirement Act of 1935 (45 U.S.C. 2281). "(8) Railroad unemployment benefits, see section 2(e) of the Railroad Unemployment Insurance Act (45 U.S.C. 352). "(9) Special pensions of persons on Army and Navy medal of honor roll, see 38 U.S.C. 562(a)-(c). "(b) For extension of military income-tax-exemption benefits to commissioned officers of Public Health Service in certain circumstances, see section 212 of the Public Health Service Act (42 U.S.C. 213)." (22) AMENDMENT OP SECTION 143.—Section 143 ( r e l a t i n g to

determination of marital status) is amended by striking out "this part " each place it appears and inserting i n lieu thereof "this part and part V". (23) AMENDMENT OF SECTION 151.—Section 151(e)(4) (defining student and educational institution) is amended to read as follows: "(4)

STUDENT D E F I N E D. — For purposes of paragraph

26 USC 143.

= 26 USC 151.

(1)(B)

(ii), the term 'student' means a n individual who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins— " (A) is a full-time student a t a n educational organization described in section 170(b)(1)(A) ( i i); or " (B) is p u r s u i n g a full-time course of institutional on-farm t r a i n i n g under the supervision of a n accredited agent of a n educational organization described i n section 170(b)(1)(A) (ii) or of a State or political subdivision of

a State." (24) AMENDMENTS OF SECTION 152.—

(A) Section 152(a) (defining dependent) is amended— (i) by inserting " o r " a t the end of paragraph (8), (ii) by striking out ", o r " a t the end of paragraph (9) and inserting in lieu thereof a period, and (iii) by striking out paragraph ( 1 0). (B) Section 152(b)(3) (relating to rules concerning the definition of dependent) is amended to read as follows: " (3) The term 'dependent' does not include any individual w h o is not a citizen o r national of the United States unless such individual is a resident of the United States or of a country contiguous to the tjnited States. The preceding sentence shall not exclude from the definition of 'dependent' any child of the taxpayer legally adopted by h i m, if, to r the taxable year of the taxpayer, the child has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household, and if the taxpayer is a citizen or national of the United States." (25) AMENDMENTS OF SECTION 164.—Section 164(d)(2) (relati n g to apportionment of taxes on real property between the seller and purchaser) is amended by striking out subparagraph s (B) and (C), and by redesignating subparagraph (D) as subparagraph (B). (26) AMENDMENTS OF SECTION les.—Section 165 ( r e l a t i n g to

deduction of losses) is amended by striking out subsection (i)

26 USC 152.

"Dependent."

26 USC 164.

26 USC 165.

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 90 STAT. 1768

PUBLIC LAW 94-455—OCT. 4, 1976 (relating to property confiscated by Cuba), and by redesignating subsection (j) as subsection (i).

26 USC 167

(^^) AMENDMENTS OF SECTION 1 6 7. —

(A) Section 167(d) (relating to agreement as to useful life for depreciation) is amended by striking out "after the date of enactment of this title" and inserting m lieu thereof "after August 16, 1954". (B) Section 167(f)(2) (defining personal property) is amended by striking out "the date of the enactment of the Revenue Act of 1962" and inserting in lieu thereof "October 16, 1962". (C) Section 167(1)(4)(A) (relating to election as to increased-capacity property) is amended by striking out "within 180 days after the date of the enactment of this subparagraph" and inserting in lieu thereof "before June 29, 1970,". 9fi Iter i7n

(^^) AMENDMENTS OF SECTION I 7 O, —

M U » 170. 5L

^^^ ^j^ Section 170 (relating to charitable deductions) is amended by striking out subsections (f)(6) and (g) (relating to unlimited charitable deductions allowed for taxable years beginning before January 1, 1975), and by redesignating subsections (h), (i), and (j) as subsections (g), (h), and (i), respectively. (ii) Section 170(b)(1) (relating to percentage limitations on deductions for individuals) is amended by striking out subparagraph (C) (relating to unlimited deductions), and by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively. (iii) Section lTO(b)(1)(A) (vii) is amended by striking out "subparagraph (E) " and inserting in lieu thereof "subparagraph (D)". (iv) Section 170(b)(1)(B) (ii) is amended by striking out "subparagraph (D) " and inserting in lieu thereof "subparagraph (C)". (v) Section 170(c) (relating to definition of charitable contribution) is amended by striking out in the last sentence "subsection (h) " and inserting in lieu thereof "subsection (g)". (vi) Section 170(e)(1)(B) (ii) (relating to certain contributions of ordinary income and capital gain property) is amended by striking out "subsection (b)(1)(E) " and inserting in lieu thereof "subsection (b)(1)(D)". (B) Section 170(d)(1)(A) (relating to carryover of excess charitable contributions) is amended by striking out "(30 percent, in the case of a contribution year beginning before January 1, 1970)". (C) Section 170(h) (relating to disallowance of deductions in certain cases), as redesignated by subparagraph (A)(i) of this paragraph, is amended by striking out "64 Stat. 996;". (D) Section 170(i) (relating to cross references), as redesignated by subparagraph (A)(i) of this paragraph, is amended to read as follows: "(i)

OTHER CROSS REFERENCES.—

"(1) For charitable contributions of estates and trusts, see section 642(c).

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90 STAT. 1769

"(2) For nondeductibility of contributions by common trust funds, see section 584. "(3) For charitable contributions of partners, see section 702. "(4) For charitable contributions of nonresident aliens, see section 873. "(5) For treatment of gifts for benefit of or use in connection with the Naval Academy as gifts to or for use of the United States, see section 6973 of title 10, United States Code. "(6) For treatment of gifts accepted by the Secretary of State under the Foreign Service Act of 1946 as gifts to or for the use of the United States, see section 1021(e) of that Act (22 U.S.C. 809(e)). "(7) For treatment of gifts of money accepted by the Attorney General for credit to the 'Commissary Funds, Federal Prisons' as gifts to or for the use of the United States, see section 2 of the Act of May 15, 1952. as amended by the Act of July 9, 1952 (31 U.S.C. 7258-4)." (29) AMENDMENTS OF SECTION 172.—

(A)(i) Section 172(b)(1) (relating to years to which loss may be carried) is amended by striking out subparagraph (E). (ii) Section 172(b)(3) is amended by striking out subparagraphs (E) and (F). (B) Section 172(c) (relating to definition of net operating loss) is amended by striking out " ( for any taxable year endi n g after December 31, 1953)". (C)(i) Section 172 (relating to net operating loss deduction) is amended by striking out subsections (f), (g), and (i), and by redesignating subsections (h), (j), (k), and (1) as subsections (f), (g), (h), and (i), respectively. (ii) Section 172(b)(1)(C) (relating to regulated transportation corporations) is amended by striking out "subsection (j)(l) " and "subsection (j) ", and inserting in lieu thereof "subsection (g)(1) " and "subsection (g) ", respectively. (iii) Paragraph s (1)(D) and (3)(C)(i) of section 172 (b) (relating to net operating loss carryovers and carrybacks) are each amended by striking out "subsection (k) " and inserting in lieu thereof "subsection (h) ". (iv) Section 172(b)(2) (relating to amount of carrybacks and carryovers) is amended by striking out "subsections (i) and (]*)" and inserting in lieu thereof 'Subsection (g) ". (D) Section 172(e) (relating to law applicable to computations) is amended by striking out the last sentence. (E) Section 172(g)(2) (relating to certain regulated transportation corporations), as redesignated by subparagraph (C) of this paragraph, is amended by striking out paragraph (4). (30) AMENDMENTS OF SECTIONS 174 AND 175.—Section 174(a)(2)

Ante, p. 1755. 26 USC 172.

Post, p. 1920.

,, »;,, i " ' *

26 USC 174 j^g

(A)(i) (relating to research and development expenditures) and section 175(d)(1)(A) (relating to soil and water conservation expenditures) are each amended by striking o u t " the date on which this title is enacted," and inserting in lieu thereof "August 16, 1954,". (31) REPEAL OF SECTION I87.—Section 187 ( r e l a t i n g to r a p i d

26 USC 187.

amortization for certain coal mine safety equipment) is repealed. (32) AMENDMENT OF SECTION 219.—Section 219(b)(2)(A) (iv)

26 USC 219.

(disqualifying goveinmental plan participants from contributing to individual retirement accounts, etc.) is amended by striking out "division" and inserting in lieu thereof "subdivision". (33) REPEAL OF SECTION 242.—Section 242 (relating to p a r -

tially tax-exempt interest received by corporations) is repealed. (34)

AMENDMENTS OF SECTION 243.—

26 USC 242.

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 90 STAT. 1770 26 USC 243.

26 USC 247.

PUBLIC LAW 94-455—OCT. 4, 1976 (A) Section 243(a)(2) (relating to the dividends received deduction) is amended by inserting after "Small Business Investment Act of 1958" the following: "(16 U.S.C. 661 and following)". (B) Section 243(b)(2)(A) (relating to dividends received by a member of an affiliated group) is amended by striking out "(except that in the case of a taxable year of a member beginning in 1963 and ending in 1964, if the election is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, such election shall be effective for such taxable year of such member, if such member consents to such election with respect to such taxable year)". (35) AMENDMENT OF SECTION 247.—Section 247(b)(2) (relating to preferred stock) is amended to read as follows: "(2) PREFERRED STOCK.—

Definition.

"(A) IN GENERAL.—The term 'preferred stock' means stock issued before October 1, 1942, which during the whole of the taxable year (or the part of the taxable year after its issue) was stock the dividends in respect of which were cumulative, limited to the same amount, and payable in preference to the payment of dividends on other stock. "(B)

CERTAIN S TO C K I S S U E D O N OR A F T E R OCTOBER 1, 1942.—

Stock issued on or after October 1, 1942, shall be deemed for purposes of this paragraph to have been issued before October 1, 1942, if it was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock (including stock which is preferred stock by reason of this subparagraph or subparagraph (D)), but only to the extent that the par or stated value of the new stock does not exceed the par, stated, or face value of the bonds or debentures issued before October 1, 1942, or the other preferred stock, which such new stock is issued to refund or replace. Regulations.

26 USC 1081. 53 Stat. 1. 26 USC 248.

26 USC 265.

"(C) DETERMINATION TINDER REGULATIONS.—The determi-

nation of whether stock was issued to refund or replace bonds or debentures issued before October 1, 1942, or to refund or replace other preferred stock, shall be made under regulations prescribe by the Secretary. "(D) ISSUANCE OF STOCK.—For purposes of subparagraph (B), issuance of stock includes issuance either by the same or another corporation in a transaction which is a reorganization (as defined in section 368(a)), a transaction to which section 371 (relating to insolvency reorganizations) applies, or a transaction subject to part VI of subchapter O (relating to exchanges in SEC obedience orders), or the respectively corresponding provisions of the Internal Revenue Code of 1939." (36) AMENDMENT OF SECTION 2 4 8.—Section 248(c) (relating to organizational expenditures) is amended b^^ striking out "the date of enactment of this title" and inserting in lieu thereof "August 16, 1954". (37) AMENDMENT OF SECTION 26 5.—Section 265(2) (relating to tax-exempt interest) is amended by striking out" (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer)".

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 PUBLIC LAW 94-455—OCT. 4, 1976

acquisitions made to evade or avoid income tax) is amended by striking out subsection (c) (relating to presumption in the case of disproportionate purchase price). (39)
 * (38) AMENDMENT OF SECTION 269.—Section 269 (relating to

AMENDMENT OF SECTION

275.—Section 2 7 5 (a)(1)(C)

90 STAT. 1771 26 USC 269.

26 USC 275.

relating to nondeductible taxes) is amended by striking out (", and corresponding provisions of p r i o r revenue laws". ( 40) AMENDMENTS OF SECTION 2 8 1. —

(A) Section 281(d)(1)(A) (relating to definition of terminal railroad corporation) is amended by inserting after " I n t e r s t a t e Commerce Act " the following: " (49 U.S.C. 1 and following)". (B) Section 281 (relating to terminal railroad corporations and their shareholders) is amended by striking out subsection (e) (relating to taxable years ending before October 23, 1962) and by redesignating subsection (f) as subsection (e).

26 USC 281.

(41) AMENDMENT OF SECTION 301.—Section 301 ( r e l a t i n g to dis-

26 USC 301.

tributions of property) is amended by striking out subsection (e) (relating to certain distributions by personal service corporations). (42) AMENDMENTS OF SECTION 311.—

(A) Section 311(d)(1) (relating to appreciated property used to redeem stock) is amended by striking out "then again shall be recognized" and inserting in lieu thereof "then a gain shall be recognized". (B)(i) Section 3 1 1 (d)(2) (relating to exceptions and limitations) is amended by striking out subparagraph (C) (relating to certain distributions before December 1, 1974) and by redesignating subparagraph s (D), (E), (F), and (G) as subparagraphs (C), (D), (E), and (F), respectively. (ii) The amendments made by clause (i) shall apply only with respect to distributions after November 30, 1974. (C) Section 3 1 1 (d)(2)(C), as redesignated by subparagraph (B) of this paragraph, is amended by striking out "26 Stat. 209;" and "38 Stat. 730;".

26 USC 311.

26 USC 311 °°*®-

(43) AMENDMENTS OF SECTION 312.—

(A) Section 3 1 2 (d)(1) (relating to certain distributions of stock and securities) is amended by striking out "this Code" each place it appears and inserting in lieu thereof "this title". (B) Section 312 (relating to earnings and profits) is amended by striking out subsection (h) (relating to personal service corporations) and by redesignating subsections (i) and (j) as subsections (h) and (i), respectively. (C) Subsection (i) of section 312 (relatinfif to distribution of proceeds of certain loans), as redesignated by subparagraph (B) of this paragraph, is amended to read as follows: "(i)

26 USC 312.

' ''^

'•

'*-'^-*

DISTRIBUTION OF PROCEEDS OF L O A N INSURED BY THE UNITED

STATES.—If a corporation distributes property with respect to its stock and if, at the time of distribution— " (1) there is outstanding a loan to such corporation which was made, guaranteed, or insured by the United States (or by any agency or instrumentality thereof), and " (2) the amount of such loan so outstanding exceeds the adjusted basis of the property constituting security for such loan, then the earnings and profits of the corporation shall be increased by

'• '-: •;"

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 90 STAT. 1772

26 USC 312.

PUBLIC LAW 94-455—OCT. 4, 1976 the amount of such excess, and (immediately after the distribution) shall be decreased by the amount of such excess. For purposes of paragraph (2), the adjusted basis of the property a t the time of distribution shall be determined without regard to any adjustment under section 1016(a)(2) (relating to adjustment for depreciation, etc.). For purposes of this subsection, a commitment to make, guarantee, or insure a loan shall be treated as the making, guaranteeing, or insuring of a loan." (D) Section 3 1 2 (j)(3) (relating to foreign investment companies), as redesignated by subsection (b) (32)(B)(i), is amended to read as follows: "(3)

PARTIAL LIQUIDATIONS AND REDEMPTIONS.—If a

foreign

investment company (as defined in section 1246) distributes amounts in partial liquidation or in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be a n amount which is not in excess of the ratable share of the earnings and profits of the company accumulated after February 28, 1913, attributable to the stock so redeemed." 26 USC 333.

(44) AMENDMENT o r SECTION 333.—Section 333(a)(1) ( r e l a t i n g

<if. Tier oo

to election as to recognition of gain in certain liquidations) is amended by striking out "on or after June 22, 1954".

26 USC 334.

(45)

AMENDMENT OF SECTION

334.—Section

334(b)(2)(A)

(relating to liquidation of subsidiary) is amended to read as follows: " (A) the distribution is pursuant to a plan of liquidation adopted not more than 2 years after the date of the transaction described in subparagraph (B) (or, in the case of a series of transactions, the date of the last such t r a n s a c t i o n); and". (46) AMENDMENTS OP SECTION 337.—

26 USC 337.

26 USC 342.

(A) Section 337(a) (relating to nonrecognition of gain or loss on certain liquidations) is amended to read as follows: " (a) GENERAL RULE. — I f, within the 12-month period beginning on the date on which a corporation adopts a plan of complete liquidation, all of the assets of the corporation are distributed i n complete liquidation, less assets retained to meet claims, then n o gain or loss shall be recognized to such corporation from the sale or exchange by i t of property within such 12-month period." (B) The first sentence of section 337(d) (relating to certain minority stockholders) is amended by striking out "on or after January 1, 1958". (47) REPEAL OF SECTION 342.—Section 342 ( r e l a t i n g to the

liquidation of certain foreign personal holding companies) is repealed. (48) AMENDMENTS OP SECTION 351.—

26 USC 351

26 USC 351 note.

(A) Section 351 (a^ (relating to transfer to corporation controlled by transfer o r) is amended by striking o u t "(including, in the case of transfers made on or before June 30, 1967, an investment company) ". (B) Section 351(d) (relating to application of June 30, 1967, date) is amended to read as follows: " (d) EXCEPTION.—This section shall not apply to a transfer of property to an investment company." (C) The amendments made by this paragraph shall t a k e effect with respect to transfers of property occurring after the date of the enactment of this Act.

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1773

(49) EEPEAL OF SECTION 363.—Section 363 ( a cross reference to other sections) is repealed. (50) AMENDMENTS OF SECTION 3 71.—Section 371(a)(1) (relati n g to certain reorganization exchanges by corporations) is amended— (A) by striking out "49 Stat. 922;" and (B) by striking out " (52 Stat. 883-905; 11 U.S.C. chapter 10) or the corresponding provisions of p r i o r law " and inserting in lieu thereof " ( 1 1 U.S.C. 501 and following)". (51) AMENDMENT OF SECTION 372.—Section 372(a) (relating to basis i n connection with b a n k r u p t c y proceedings) is amended by striking out "54 Stat. 709;". _ (52) REPEAL OF SECTION 373.—Section 373 (relating to nonrecognition of loss in certain railroad reorganizations) is repealed. (53) AMENDMENT OF SECTION 374.—Section 374(a)(1) (relating to nonrecognition of gain or loss i n certain railroad reorganizations) is amended by striking out "49 Stat. 922;". (54) AMENDMENT OF SECTION 381.—Section 381(c) (relating to

26 USC 363. 26 USC 371.

26 USC 372. ^ 26 USC 373. 26 USC 374. 26 USC 381.

items carried over in certain corporate acquisitions) is amended by striking out paragraph (20). (55) R E P E A L OF SECTIONS 391 THROUGH 395.—Subchapter C of

chapter 1 (relating to corporate distributions and adjustments) is amended by striking out part VII (relating to effective dates of subchapter C).

26 USC

391-395.

(56) AMENDMENTS OF SECTION 401.—

(A) Paragraph s (12) and (13) of section 401(a) (relat- 26 USC 401. ing to requirements for qualification) a r e each amended by striking out " the date of the enactment of the Employee > * vi Retirement Income Security Act of 1974" and inserting in lieu thereof "September 2, 1974", (B) Paragraph (15) of section 401(a) is amended by striking out " the date of the enactment of the Employee Retirement Income Security Act of 1974" and inserting in lieu ^^ ^^^ ^^^ thereof "September 2, 1974,". "•'*^(C) Paragraph (19) of section 401(a) is amended by ,, striking out "enactment of the Employee Retirement Income .'" Security Act of 1974" and inserting in lieu thereof "September 2, 1974". (D) The last sentence of section 401(a) is amended to read as follows: " Paragraph s (11), (12), (13), ( 1 4), (15), ( 1 9), and (20) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of such section." (57) AMENDMENTS OF SECTION 402.—

(A) Section 4 0 2 (a)(4) (relating to distributions made to 26 USC 402. non-resident alien individuals) is amended by striking out "basic salary" each place it appears therein and inserting in lieu thereof "basic pay", and by amending the last sentence in such paragraph to read as follows: " I n the case of distributions under the civil service retirement laws, the term 'basic p a y ' shall have the meaning provided i n section 8331(3) of title 5, United States Code." (B) Section 402 (relating to taxability of beneficiary of employees' trusts) is amended by striking out subsection (d) ( r e l a t m g to certain trust agreements made before October 21, 1942).

-194 O—78—Dt. 2

20

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 9 0 STAT. 1774

PUBLIC LAW 94-455—OCT. 4, 1976 o* f >

26 USC 402.

26 USC 402 note.

(C)(i) So much of the t h i r d sentence of section 402(e)(4) (A) (relating to definition of l u m p sum distributions) as precedes "a distribution of an annuity contract" is amended to read as follows: " E x c e p t for purposes of subsection (a)(2) and section 403(a)(2), ". (ii) The amendment made by clause (i) shall apply with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date. (58) AMENDMENT OF SECTION 4 0 3. — The last t w o sentences of

26 USC 403.

section 4 0 3 (a)(4) (relating to taxation of employee annuities) are amended to read as follows: " For purposes of t h i s title, a transfer described in subparagraph (B)(i) shall be treated as a rollover contribution described in section 4 0 8 (d)(3). Subparagraph (B) (ii) does not apply in the case of a transfer to an employees' trust, or annuity plan if any part of a payment described in subparagraph (A) is attributable to a n a n n u i t y p l a n under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were m a d e on h i s behalf under the plan."

26 USC 404.

(59) AMENDMENT OF SECTION 4 04.—Section 404 ( r e l a t i n g to

deduction for contributions to pension plans, etc.) is amended by striking out subsection (d) (relating to carryover of pre-1954 unused deductions). 26 USC 409.

(60)

AMENDMENT

or

SECTION

4 09.—Section

409(b)(3)(C)

(relating to tax-free rollovers of individual retirement bonds) is amended by striking out "section 4 0 3 (d)(3). " and inserting in lieu thereof "section 408(d)(3). " (61)

26 USC 410.

AMENDMENTS OF SECTION 4 1 O. —

(A) Subparagraph s (C) and (D) of section 410(a)(5) (relating to breaks in service) are each amended by striking out "purposes of subsection (a)(1) " and inserting in lieu thereof "purposes of paragraph (1) ". (B) Paragraph (1)(C) of section 410(c) (relating to application of minimum participation standards) is amended by striking out " the date of the enactment of the Employee Ketirement Income Security Act of 1974" and inserting i n lieu thereof "September 2, 1974,". (C) Paragraph (2) of section 410(c) is amended by striking out " the d a y before the date of the enactment of this section" and inserting in lieu thereof "September 1, 1974".

fA.,r 29 USC 1001 'Hote. '

(62) AMENDMENTS o r SECTION 4 1 1. —

26 USC 411.

,i^m-

^,

(A) Subsection (a) of section 411 (relating to minimum vesting standards) is amended by striking out "subsection (a)(8) " and inserting in lieu thereof " paragraph (8) ". (B) Subsection (a)(3)(D) (iii) of section 411 is amended— (i) by striking out " the date of the enactment of the Employee Eetirement Income Security Act of 1974" and "the date of the enactment of such Act " and inserting in lieu thereof in both such places "September 2, 1974, and (ii) by striking out " the date of the enactment of the Act " and inserting i n lieu thereof "September 2, 1974,". (C) The heading for subparagraph (C) of section 411 (a)(7) is amended to read as follows: "(C)

R E P A Y M E N T OF SUBPARAGRAPH (B) DISTRIBUTIONS.—"

(D) Subsection (b)(1)(D)(i) and (e)(1)(C) of section 411 are each amended by striking out " the date of the

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1775

enactment of the Employee Retirement Income Security Act • of 1974" and inserting in lieu thereof "September 2, 1974". 29 USC 1001 (E) Subsection (e)(2) of section 411 is amended by strik- nothi n g out " the date before the date of the enactment of the Employee Retirement Income Security Act of 1974" and "^^ ^^^ *^^inserting in lieu thereof "September 1, 1974". (63) AMENDMENTS o r SECTION 412.—

(A) Subsection (h) of section 412 (relating to minimum 26 USC 412. funding standards) is amended by striking out " the d a y before the date of the enactment of the Employee Retirement Income Security Act of 1974" and inserting in lieu thereof '^ '"" " "September 1, 1974". . " (B) Subsection (h)(5) of section 412 is amended by striking out " the date of the enactment of the Employee Retirement Income Security Act of 1974" and inserting in lieu thereof "September 2, 1974". (64)

AMENDMENTS OF SECTION 414.—

(A) The heading for section 414(f) (relating to multiemployer plans) is amended to read as follows: "(f)

26 USC 414.

MULTIEMPLOYER P L A N. — "

(B) Section 414(1) (relating to mergers and consolidations of plans or transfers of plan assets) is amended by striking out " the date of the enactment of the Employee Retirement Income Security Act of 1974" and inserting in lieu thereof "September 2, 1974". (65)

AMENDMENTS OF SECTION 415.—

(A) Section 4 1 5 (b)(2)(A) (relating to adjustments for 26 USC 415. certain forms of benefits) is amended by striking out "and 409(b)(3)(C) " and inserting in lieu thereof " and 409(b)(3)

(C))"(B) Section 4 1 5 (b)(2)(B) is amended by s t r i k m g out " ( a s defined in section 401(a) (11) ( II) ( i i i)) " and inserting in lieu thereof " ( a s defined in section 401(a) (11)(G) ( i i i)) ". (66)

AMENDMENTS OP SECTION 453.—

~

(A) Section 453(c)(3) (relating to adjustment in tax for 26 USC 453. amounts previously taxed) is amended by striking out "corresponding provisions of the Internal Revenue Code of 1939" and inserting in lieu thereof "corresponding provisions of the I n t e r n a l Revenue Code of 1954". (B) Section 4 5 3 (d)(4)(B) (relating to liquidations to which section 337 applies) is amended by striking out " o r section 617(d)(1) " and inserting in lieu thereof, 617(d) (1)". (67)

AMENDMENT

OF SECTION

455.—Section 4 5 5 (c)(3)(B)

26 USC 455.

(relating to prepaid subscription income) is amended by striking out "for his first taxable year (i) which begins after December 31, 1957, and (ii) in which he receives prepaid subscription income in the trade or business" and inserting in lieu thereof "for his first taxable year in which he receives prepaid subscription income in the trade or business". (68)

AMENDMENT

OF SECTION

456.—Section 4 5 6 (c)(3)(B)

(relating to election without consent with respect to treatment of prepaid dues) is amended by striking out "for its first taxable year (i) which begins after December 31, 1960, and ( i i) " and inserting in lieu thereof "for its first taxable year". (69)

AMENDMENTS OF SECTION 4 6 I. —

26 USC 456.

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 90 STAT. 1776 26 USC 461.

' '*

PUBLIC LAW 94-455—OCT. 4, 1976 (A) Section 461(c) (relating to accrual of real property taxes) is amended by striking out paragraph (2) and by redesignating paragraph (3) as paragraph (2). (B) Section 461(c)(2) (relating to elections without consent), as redesignated by subparagraph (A), is amended by striking out "his first taxable year which begins after December 31, 1953, and ends after the date of enactment of this title in which the taxpayer" and inserting in lieu thereof "his first taxable year in which he". (70)

26 USC 481.

(A) Section 481(b) (relating to limitation on tax where substantial adjustments are required by a change in accounting method) is amended by striking out paragraphs (4), (5), and (6) (relating to pre-1954 adjustments). (B) Section 481(b)(1) and (2) are each amended by striking out ", other than the amount of such adjustments to which paragraph (4) or (5) applies," each place it appears. (71)

26 USC 508.

AMENDMENTS OF SECTION 481.—

AMENDMENTS OF SECTION SO8.—

(A) Subsections (a) and (b) of section 508 (relating to special rules relating to 501(c)(3) organizations) are each amended by striking out the last sentence therein. (B) Section 508(e)(2) (relating to special rules for existing private foundations) is amended by striking out subparagraph (A) (relating to taxable years beginning before 1972), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking out " (B) " in subparagraph (B) (as so redesignated) and inserting in lieu thereof " (A) ". (C) Section 508(d)(2)(A) (relating to disallowance of deductions for certain charitable gifts or bequests) is amended by striking out "(e)(2)(B) and (C) " and inserting in lieu thereof " (e)(2) ". (72) AMENDMENTS OF SECTION 5 1 4. —

26 USC 514.

^

26 USC 534.

(A) Section 514(c)(1) (relating to definition of acquisition indebtedness) is amended by striking out the comma at the end of subparagraph (C) and all that follows, and inserting in lieu thereof a period. (B) Section 514 (relating to unrelated debt-financed income) is amended by striking out subsection (f) (relating to definition of business lease), by striking out subsection (g) (relating to definition of business lease indebtedness), and by redesignating subsection (h) as subsection (f). (C) Section 514(b)(3)(C) (iii) (relating to definition of debt-financed property) is amended to read as follows: "(iii) shall not apply to property subject to a lease which is a business lease (as defined in this section immediately before the enactment of the Tax Reform Act of 1976)." (D) Section 514(f) (relating to personal property leased with real property), as redesignated by subparagraph (B) of this paragraph, is amended by striking out "and the term 'premises' include" and inserting in lieu thereof "includes". (73) AMENDMENTS or SECTION 534.— ( ^) Section 534(b) (relating to mailing notices of deficiency) is amended by striking out the last sentence. (B) Subsection (e) of section 534 (relating to effective date of section) is repealed.

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1777

(74) AMENDMENT OF SECTION 533.—Section 535(b)(1) (relating 26 USC 535. to adjustments in computing accumulated taxable income) is amended by striking out "(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Co<le of 1939 for taxable years beginning after December 31, 1940)". ( 7 5) AMENDMENTS OF SECTION 5 a 7. —

(A) Section 537(b)(2) (relating to definition of excess business holdings redemption needs) is amended by striking out ", with respect to taxable years of the corporation ending after May 26, 1969,". (B) Section 537(b)(4) (relating to inferences as to prior years) is amended by striking out "or (2)". (76) AMENDMENTS OF SECTION 542.— (A) Section 542(a)(2) (relating to definition of personal holding company) is amended by striking out the last sentence. (B) Section 542(b)(2) (relating to ineligible affiliated group) is amended by striking out ", other than an affiliated group of railroad corporations the common parent of which would be eligible to file a consolidated return under section 141 of the Internal Revenue Code of 1939 prior to its amendment by the Revenue Act of 1942,". (C) Section 542(c)(2) (relating to financial institutions) is amended by striking out "without regard to subparagraphs (D) and (E) thereof". (D) Section 542(c)(8) (relating to small business investment companies) is amended by inserting after "Small Business Investment Act of 1958" the following: " (15 U.S.C. 661 and following)". (77) AMENDMENTS OF SECTION 545.— (A) Section 545(b)(1) (relating to deduction of taxes in computing undistributed personal holding company income) is amended— (i) in the first sentence, by striking out "(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after December 31, 1940)"; and (ii) by striking out the last two sentences (relating to deduction of taxes). (B) Section 545(b) (relating to adjustments in computing undistributed personal holding company income) is amended by striking out paragraph (7) (relating to payment of indebtedness incurred before 1934). (C) Section 545(c)(2)(A) (relating to corporations to which special adjustment applies) is amended by striking out "the date of enactment of this subsection" and inserting in lieu thereof "February 26, 1964". (78) ^ AMENDMENT OF SECTION 547.—Section 547 (relating to the deduction of deficiency dividends) is amended by striking out subsection (h) (relating to the effective date). (79) AMENDMENT OF SECTION 551.—Section 551(c) (relating to foreign personal holding company income tax returns), as redesignated by subsection (b)(1)(F) of this section, is amended by striking out "taxable income, foreign personal holding com-

26 USC 537. ^, . ^

26 USC 542.

26 USC 545.

26 USC 547. 26 USC 551.

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 90 STAT. 1778

26 USC 556.

26 USC 564. 26 USC 583. 26 USC 592.

26 USC 593.

'

26 USC 601.

PUBLIC LAW 94-455—OCT. 4, 1976 pany," and inserting in lieu thereof "taxable income, foreign personal holding company income,". (80) AMENDMENT OF SECTION 5 56.—The first sentence of section 556(b)(1) (relating to deduction of taxes in computing undistributed foreign personal holding company income) is amended by striking out "(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years begmning after December 1, 1940)". (81) AMENDMENT OF SECTION 564.—Section 564 (relating to dividend carryovers) is amended by striking out subsection (c) (relating to carryovers from pre-1954 years). (82) REPEAL OF SECTION 5 83.—Section 583 (relating to deduction of dividends paid on certain preferred stock by banks or trust companies) is repealed. (83) REPEAL OF SECTION 592.—Section 592 (relating to the deduction by mutual savings banks for repayment of certain loans) is repealed. (84) AMENDMENTS OF SECTION 593.— (A) Section 593(b)(2) (relating to additions to bad debt reserves for mutual savings banks, etc.) is amended by striking out, in the table in subparagraph (A), the following: "1969 1970 1971 1972 1973 1974 1975

60 57 54 51 49 47 45

percent. percent. percent. percent. percent. percent. percent."

(B) Section 593(c) (relating to reserves for mutual savings banks) is amended by striking out paragraphs (2), (3), (4), and (5), by redesignating paragraph (6) as paragraph (3), and by inserting immediately after paragraph (1) the following: "(2) CERTAIN PRE-1963 RESERVES.—Notwithstanding the second sentence of paragraph (1), any amount allocated pursuant to paragraph (5) (as in effect immediately before the enactment of the Tax Reform Act of 1976) during a taxable year beginning before January 1, 1977, to the reserve for losses on qualifying real property loans out of the surplus, undivided profits, and bad debt reserves (determined as of December 31, 1962) attributable to the period before the first taxable year beginning after December 31, 1951, shall not be treated as a reserve for bad debts for any purpose other than determining the amount referred to in subsection (b)(1)(B), and for such purpose such amount shall be treated as remaining in such reserve." (C) Section 593 is amended by striking out subsection (d) (relating to taxable years beginning in 1962 and ending in 1963), and by redesignating subsections (e) and (f) as subsections (d) and (e),respectively. (D) Section 593(b)(2)(E)(i) is amended by striking out "subsection (f) " and inserting in lieu thereof "subsection (e)". (85) REPEAL or SECTION 6 01.—Subchapter H of chapter 1 relating to banking institutions) is amended by striking out part III (relating to special deduction for bank affiliates).

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Page:United States Statutes at Large Volume 90 Part 2.djvu/311

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1779

( 8 6) AMENDMENTS o r SECTION 6 1 3 A. —

(A) Section 6 1 3 A (b)(1)(C) (relating to exemption for 26 USC 613A. certain domestic gas wells) is amended by striking out "within the meaning of section 6 1 3 (b)(1)(A) ". (B) Section 613A(c)(6)(i) (relating to limitations on percentage depletion in case of oil and gas wells) is amended by striking o u t "determined w i t h " and inserting i n lieu thereof "determined without". (87)

AMENDMENTS

OF SECTION 6 1 4. —

?

(A)(i) Section 614(c) (relating to aggregation of mineral 26 USC 614. interests in mines) is amended by striking out paragraph (4) (relating to special rule as to exploration deductions p r i o r to i aggregation). (ii) The amendment made by clause (i) shall a p p l y with 26 USC 614 respect to elections to form aggregations of operating min- "o*®eral interests made under section 614(c)(1) of the Internal Revenue Code of 1954 for taxable years beginning after December 31, 1976. (B) The t h i r d sentence of section 614(c)(2) (relating to election to treat a single interest as more than one property) is amended to read as follows: " A separate property so •>!::; formed may, under regulations prescribed by the Secretary, be included as a part of a n aggregation in accordance with paragraph s (1) and (3). " (C) Section 6 1 4 (c)(3) (relating to manner and scope of election) is amended to read as follows: "(3)

M A N N E K AND SCOPE OF ELECTION.—The elections provided

by paragraph s (1) and (2) shall be made, in accordance with regulations prescribed by the Secretary, not later than the time prescribed for filing the return (including extensions thereof) for the first taxable year— " (A) in which, in the case of an election under paragraph (1), any expenditure for development or operation in respect of the separate operating mineral interest is m a d e by the taxpayer after the acquisition of such interest, or " (B) in which, in the case of an election under paragraph (2), expenditures for development or operation of more than one mine in respect of a property are made by the taxpayer after the acquisition of the property. A n election made under paragraph (1) or (2) for a taxable year shall be binding upon the taxpayer for such year and all subsequent taxable years, except that the Secretary may consent to a different treatment of any interest with respect to which a n election has been made."

.•&}^i

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(88) REPEAL OF SECITON 615.—Section 615 (relating to deduc- 26 USC 615.

tion of pre-1970 exploration expenses) is repealed. (89) AMENDMENT

OF SECTION

617.—Section

617(a)(2)(B)

26 USC 617.

(relating to time and scope of election to deduct certain mining exploration expenditures) is amended by striking out " may not be revoked after the last day of the t h i r d month following the month in which the final regulations issued under the authority of this subsection are published in the Federal Register, unless" and inserting in lieu thereof "may not be revoked unless". (90) R E P E A L OF SECTION 6;52.—Section 632 ( r e l a t i n g to tax in

26 USC 632.

case of sale of oil and gas properties) is repealed. (91)

AMENDMENT

OF SECTION

69I.—Section

691(c)(1)(B)

(relating to deduction for estate tax) is amended by striking out the last sentence.

26 USC 691.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/312

 90 STAT. 1780

26 USC 751. 26 USC 771.

PUBLIC LAW 94-455—OCT. 4, 1976 (92) AMKNDMKNT OF SI-ICTION cy2.—The heading of section 692 (rehxting to income taxes of members of Armed Forces who die in a combat zone) is amended by striking out "ON" the first time it appears in the section heading and inserting in lieu thereof "OF". (93) AMKNDMKNT OF SKCTION 75].—Section 751(c) (relating to unrealized receivables) is amended by striking out "1254(a), or 1250(a)," and inserting in lieu thereof "1245(a), 1250(a),". (94) RKI'KAL OF SKCTION 771.—Part IV of subchapter K of chapter 1 (relating to effective date of subchapter K) is repealed. (95)

26 USC 802.

802.—

(A) Section 802(a)(1) (relating to tax imposed on life insurance companies) is amended by striking out "beginning after December 31, 1957,". (B) Section 802(a)(2) (relating to alternative tax in case of capital gains) is amended by striking out "beginning after December 31, 1961,". (C) Section 802(a) is amended by striking out paragraph (3) (relating to special rules for 1959 and 1960). (96)

26 USC 804.

XVMKNOMKNTS O F SKCTION

A M K N D M K N T S O F SKCTION

804.—

( ^) Section 804(a) is amended by striking out paragraph (6) (relating to certain exceptions). (B) Section 804(b)(2) (relating to short-term capital gains) is amended by striking out "In the case of a taxable year beginning after December 31, 1958, the" and inserting in lieu thereof "The". (97) AMKNDMKNTS OF SKCTION 805.—

26 USC 805.

"Pension plan reserves."

(A) Section 805(b)(3)(B) (relating to average earnings rate) is amended to read as follows: "(B) Si'KciAL RULE.—For purposes of subparagraph (A), the current earnings rate for any taxable year of any company which, for such year, is an insurance company (but not a life insurance company) shall be determined as if this part applied to such company for such year." (B) Section 805(b)(4)(B) (relating to basis of assets) is amended by striking out " (determined without regard to fair market value on December 31, 1958)". (C) Section 805(d) (relating to pension plan reserves) is amended to read as follows: " (d) PENSION Pi^N RESERVES.—For purposes of this part, the teiTii 'pension plan reserves' means that portion of the life insurance reserves which is allocable to contracts— "(1) purchased under contracts entered into with trusts which (as of the time the contracts were entered into) were deemed to be (A) trusts described in section 401(a) and exempt from tax under section 501(a), or (B) trusts exempt from tax under section 165 of the Internal Revenue Code of 1939 or the corresponding provisions of prior revenue laws; "(2) purchased under contracts entered into under plans which (as of the time the contracts were entered into) were deemed to be plans described in section 403(a), or plans meeting the requirements of paragraphs (3), (4), (5), and (6) of section 165(a) of the Internal Revenue Code of 1939; "(3) provided for employees of the life insurance company under a plan which, for the taxable year, meets the requirements of paragraphs (3), (4), (5), (6), (7), (8), (11), (12), (13), (14^, (15), (16), (19),and (20) of section 40i(a)/

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