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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 567

4262(c) (defining u n i n t e r r u p t e d international air transportation) 26 USC 4262. is amended by striking out "6 h o u r s " each place it a p p e a r s and inserting in lieu thereof "12 h o u r s ". (2) AUTHORITY TO WAIVE 225-MILE ZONE PROVISIONS.—Section

4262 (defining taxable transportation) is amended by adding at 26 USC 4262. the end thereof the following new subsection: "(e) AUTHORITY TO W A IV E 2 2 5 - M I L E Z O N E PROVISIONS.—

"(1) IN GENERAL.—If the Secretary of the Treasury determines that C a n a d a or Mexico has entered into a qualified agreement— "(A) the Secretary shall publish a notice of such determi- Publication in Federal nation in the Federal Register, and "(B) effective with respect to transportation beginning Register. after the date specified in such notice, to the extent provided in the a g r e e m e n t, the term '225-mile zone' shall not include part or all of the country with respect to which such determination is made. "(2) TERMINATION OF WAIVER.—If a determination was m a d e

under paragraph (1) with respect to any country and the Secretary of the Treasury subsequently determine s that the agreem e n t is no longer in effect or that the a g r e e m e n t is no longer a qualified agreement— "(A) the Secretary shall publish a notice of such determi- Publication in Federal nation in the Federal Register, and Register. "(B) subparagraph (B) of paragraph (1) shall cease to apply with respect to transportation beginning after the date specified in such notice. "(3) QUALIFIED AGREEMENT.—For purposes of this subsection, the term 'qualified a g r e e m e n t ' means a n a g r e e m e n t between the United States and C a n a d a or Mexico (as the case may be)— "(A) setting forth that portion of such country which is not to be t r e a t e d as within the 225-mile zone, and "(B) providing that the tax imposed by such country on transportation described in subparagraph (A) will be a t a level which the Secretary of the Treasury determine s to be appropriate. "(4)

REQUIREMENT THAT AGREEMENT BE SUBMITTED TO CON-

GRESS.—No notice may be published under paragraph (1)(A) with respect to any qualified a g r e e m e n t before the date 90 days after the date on which a copy of such a g r e e m e n t was furnished to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the S e n a t e. " (3) EFFECTIVE DATE.—The amendments m a d e by this subsec- 26 USC 4262 tion shall apply to transportation beginning after August 31, note. 1982. (b) M A N N E R IN W H I C H T A X ON TRANSPORTATION REQUIRED TO B E S H O W N ON A I R L I N E TICKETS.—

BY A I R

Is

(1) GENERAL RULE.—Subsection (a) of section 7275 (relating to 26 USC 7275. penalty for offenses relating to certain airline tickets and advertising) is amended to read as follows: "(a) TICKETS.—In the case of transportation by air all of which is taxable transportation (as defined in section 4262), the ticket for such transportation shall show the total of— "(1) the a m o u n t paid for such transportation, and "(2) the taxes imposed by subsections (a) and (b) of section 4261.".

97-200 O—84—pt. 1

20: QL3

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 96 STAT. 568 26 USC 7275 ^°^^-

PUBLIC LAW 97-248—SEPT. 3, 1982 (2) EFFECTIVE DATE.—The amendment m a d e by subsection (a) shall apply with respect to transportation beginning after the date of the e n a c t m e n t of this Act. PART II—COMMUNICATIONS SERVICES

26 USC 4251.

SEC. 282. EXTENSION OF EXCISE TAX ON COMMUNICATIONS SERVICES. (a) IN GENERAL.—Section 4251 (relating to imposition of tax on communications services) is amended by striking o u t subsections (a) and (b) and inserting the following n e w subsections: "(a) T A X IMPOSED.—

"(1) IN GENERAL.—There is hereby imposed on a m o u n t s paid for communications services a tax equal to the applicable percentage of a m o u n t s so paid. "(2) PAYMENT OF TAX.—The tax imposed by this section shall be paid by the person paying for such services. "(b) DEFINITIONS. — " For purposes of subsection (a)— "(1) COMMUNICATIONS SERVICES. — " The term ' c o m m u n i c a t i o n s

services' means — "(A) local telephone service; "(B) toll telephone service; and "(C) teletypewriter e x c h a n g e service. "(2) APPLICABLE P E R C E N T A G E. — " The term 'applicable percent-

age' means — "With respect to amounts paid pursuant to bills first rendered— During 1983, 1984, or 1985 During 1986 or thereafter

26 USC 4251 ^^^^-

The percentage is— 3 0.".

(b) EFFECTIVE D A T E. — " The amendment m a d e by subsection (a) shall apply with respect to a m o u n t s paid for communications services pursuant to bills first rendered after December 31, 1982. PART III—CIGARETTES

26 USC 5701.

26 USC 5701 note.

SEC. 283. INCREASE IN TAX ON CIGARETTES. (a) RATE OF TAX.—Subsection (b) of section 5701 (relating to r a t e of tax on cigarettes) is amended— (1) by striking out " $ 4 " in paragraph (1) and inserting in lieu thereof "$8"; and (2) by striking o u t "$8.40" in paragraph (2) and inserting in lieu thereof "$16.80". (b) FLOOR STOCKS.— (1) IMPOSITION OF TAX.—On c i g a r e t t e s m a n u f a c t u r e d

in or

imported into the United States which a r e removed before January 1, 1983, and held on such date for sale by any person, the r e shall be imposed the following taxes: (A) SMALL CIGARETTES.—On cigarettes, weighing not more

than 3 pounds per thousand, $4 per thousand; (B) LARGE CIGARETTES.—On

cigarettes, weighing

more

than 3 pounds per thousand, $8.40 per thousand; except that, if more than 6V2 inches in length, they shall be taxable a t the r a t e prescribed for cigarettes weighing not more than 3 pounds per thousand, counting each 2 % inches, or fraction thereof, of the length of each as one cigarette. (2) LIABILITY FOR TAX AND METHOD OF PAYMENT.—

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 569

(A) LIABILITY FOR TAX.—A person holding c i g a r e t t e s on

January 1, 1983, to which any tax imposed by paragraph (1) applies shall be liable for such tax. (B) M E T H O D OF P A Y M E N T. — The tax imposed by paragraph

(1) shall be t r e a t e d as a tax imposed under section 5701 and shall be d u e and payable on January 18, 1983 in the s a m e m a n n e r as the tax imposed under such section is payable with respect to cigarettes removed on January 1, 1983. (3) CIGARETTE.—For purposes of this subsection, the term " c i g a r e t t e " shall h a v e the m e a n i n g given to such term by subsection (b) of section 5702 of the I n t e r n a l Revenue Code of 1954. (4) EXCEPTION FOR RETAILERS.—The tax e s imposed by para-

g r a p h (1) shall not apply to cigarettes in retail stocks held on January 1, 1983, a t the place w h e r e intended to be sold a t retail. (c) EFFECTIVE D A T E. — The amendment m a d e by subsection (a) shall 26 USC 5701 apply with respect to cigarettes removed after December 31, 1982 ^°^^and before October 1, 1985.

PART IV—TAPS ADJUSTMENT ELIMINATED SEC. 284. ELIMINATION OF THE TAPS ADJUSTMENT.

(a) IN GENERAL. Subsection (d) of section 4996 (relating to Alaskan oil from Sadlerochit reservior) is amended to read as follows:

26 USC 4996.

"(d) ALASKAN O I L F R O M SADLEROCHIT RESERVOIR.—For purposes of

this chapter— "(1) REMOVAL

PRICE DETERMINED ON MONTHLY

BASIS.—The

removal price of Sadlerochit oil removed during any c a l e n d a r month shall be the average of the producer's removal prices for such month. "(2) SADLEROCHIT OIL D E F I N E D. — The term

'Sadlerochit

oil'

means crude oil produced from the Sadlerochit reservoir in the P r u d h o e Bay oilfield.". (b) EFFECTIVE D A T E. — The amendment m a d e by this section shall apply with respect to oil removed after December 31, 1982.

26 USC 4996 note.

Subtitle G—Miscellaneous SEC. 28.5. TWO-YEAR EXTENSION OF EXCLUSION FROM GROSS INCOME OF NATIONAL RESEARCH SERVICE AWARDS.

Paragraph (2) of section 161(b) of the Revenue Act of 1978 (relating to exclusion from gross income for national research service awards) is amended by striking out "1981" and inserting in lieu thereof "1983".

26 USC 117 note.

SEC. 286. SPECIAL RULES FOR CERTAIN AMATEUR SPORTS ORGANIZATIONS.

(a) SPECIAL RULES.—Section 501 is amended by r e designating sub-

section (j) as subsection (k) and by inserting after subsection (i) the following new subsection: "(j) SPECIAL TIONS.—

RULES

FOR CERTAIN

AMATEUR

SPORTS

ORGANIZA-

"(1) IN GENERAL.—In the case of a qualified a m a t e u r sports organization—

26 USC 51.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/612

 96 STAT. 570

PUBLIC LAW 97-248—SEPT. 3, 1982 "(A) the requirement of subsection (c)(3) that no part of its activities involve the provision of athletic facilities or equipment shall not apply, and "(B) such organization shall not fail to meet the requirements of subsection (c)(3) merely because its membership is local or regional in nature. "(2) QUALIFIED AMATEUR SPORTS ORGANIZATION DEFINED.—For

purposes of this subsection, the term 'qualified amateur sports organization' means any organization organized and operated exclusively to foster national or international amateur sports competition if such organization is also organized and operated primarily to conduct national or international competition in sports or to support and develop amateur athletes for national or international competition in sports." (b) DEFINITION OF CHARITABLE CONTRIBUTION.—(1) Subsection (c) of 26 USC 170. section 170 (defining charitable contribution) is amended by adding at the end of paragraph (2) the following new sentence: "Rules Ante, p. 569. similar to the rules of section 501(j) shall apply for purposes of this paragraph.". 26 USC 2055. (2) Subsection (a) of section 2055 (relating to transfers for public, charitable, and religious uses) is amended by adding at the end thereof the following new sentence: "Rules similar to the rules of section 501(j) shall apply for purposes of paragraph (2).". 26 USC 2522. (3) Subsection (a) of section 2522 (relating to charitable and similar gifts) is amended by adding at the end thereof the following new sentence: "Rules similar to the rules of section 501(j) shall apply for purposes of paragraph (2).". 26 USC 501 note. (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on October 5, 1976. SEC. 287. NEW JERSEY GENERAL REVENUE SHARING ALLOCATION. (a) IN GENERAL.—Subsection (e) of section 109 of the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1228) (defining general tax effort factor) is amended by inserting at the end thereof the following new paragraph: "(3)

31 USC 1228 ''°'^-

NEW JERSEY FRANCHISE AND GROSS RECEIPTS TAXES.—

"(A) The New Jersey Franchise and Gross Receipts Taxes (N.J. Rev. Stat. 54:30A-18.1) transferred to a unit of local government within the State in the years beginning January 1 of 1980, 1981, and 1982 shall be deemed to be an adjusted tax of such units for purposes of paragraph (2)(A)(i). "(B) The provisions of subparagraph (A) shall be given effect for quarterly payments made for quarters beginning after December 31, 1982, only if the Governor of the State of New Jersey notifies the Secretary that, prior to January 1, 1983, the State amended the New Jersey Franchise and Gross Receipts Taxes statute to provide for collection and retention of such taxes by units of local government for years beginning as of January 1, 1983. "(C) Notwithstanding the limitation in subparagraph (B), the provisions of subparagaph (A) shall be given effect with respect to the quarterly payment to be made for the quarter beginning October 1, 1982.". (b) EFFECTIVE DATE.—The amendment made by this section shall be effective after September 30, 1982.

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 PUBLIC LAW 97-248—SEPT. 3, 1982 SEC.

288. ILLEGAL PAYMENTS TO GOVERNMENT EMPLOYEES.

96 STAT. 571

OFFICIALS OR

(a) IN GENERAL.—Paragraph (1) of section 162(c) (relating to illegal 26 USC 162. payments to Government officials or employees) is amended— (1) by striking out "would be unlawful under the laws of the United States if such laws were applicable to such payment and to such official or employee" and inserting in lieu thereof "is unlawful under the Foreign Corrupt Practices Act of 1977", and 15 USC 78a note. (2) by striking out "(or would be unlawful under the laws of the United States)" and inserting in lieu thereof "(or is unlawful under the Foreign Corrupt Practices Act of 1977)". (b) COORDINATION WITH SUBPART F.—

(1) Subsection (a) of section 952 is amended by adding at the 26 USC 952. end thereof the following new sentence: "The payments referred to in paragraph (4) are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person." (2) Subsection (a) of section 964 is amended by adding at the 26 USC 964. end thereof the following new sentence: "The payments referred to in the preceding sentence are payments which would be unlawful under the Foreign Corrupt Practices Act of 1977 if the payor were a United States person." (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 162 note. apply to payments made after the date of the enactment of this Act. SEC. 289. DEBT MANAGEMENT PROVISIONS. (a) DETERMINATION BY SECRETARY OF INVESTMENT YIELD ON UNITED STATES SAVINGS BOND.—

(1) Subsection (b) of section 22 of the Second Liberty Bond Act (31 U.S.C. 757c) is amended— (A) by amending paragraph (3) to read as follows: "(3) The Secretary of the Treasury, with the approval of the President, may fix the investment yield on any United States savings bond. The Secretary of the Treasury, with the approval of the President, may provide for increases and decreases in the investment yield on any outstanding United States savings bond; except that the investment yield on any bond for the period held may not be decreased below the minimum yield for such period guaranteed at the time of its issuance."; (B) by striking out "the Secretary of the Treasury may prescribe: Provided" and all that follows down through the end of the second sentence of paragraph (1) of such subsection and inserting in lieu thereof "the Secretary of the Treasury may prescribe."; (C) by striking out "and shall be expressed in terms of their maturity value" in the third sentence of paragraph (1) of such subsection; and (D) by striking out "higher rates which are consistent" and inserting in lieu thereof "rates which are consistent" in subparagraph (B) of paragraph (2) of such subsection. (2) The second sentence of section 22A(b)(l) of such Act is 31 USC 757C-2. amended by striking out "the Secretary of the Treasury may prescribe" and all that follows down through the end thereof and inserting in lieu thereof "the Secretary of the Treasury may prescribe.". 31 USC (b) TRANSITIONAL RULE.—In the case of any savings bond issued note. 757c before the 30th day after the date of the enactment of this Act, for

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Page:United States Statutes at Large Volume 96 Part 1.djvu/614

 96 STAT. 572 31 USC 757c, '^^'^^-^-

PUBLIC LAW 97-248—SEPT. 3, 1982 purposes of sections 22 and 22A of the Second Liberty Bond Act, the minimum yield guaranteed for the period held shall be the scheduled investment yield for such period as in effect on such 30th day. (c) LIMIT ON OUTSTANDING BONDS.—Effective on the date of the enactment of this Act, the last sentence of the second paragraph of the first section of the Second Liberty Bond Act (31 U.S.C. 752) is amended by striking out "$70,000,000,000" and inserting in lieu thereof "$110,000,000,000". SEC. 290. JEFFERSON COUNTY MENTAL HEALTH CENTER.

(a) IN GENERAL.—The Secretary is authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to the Jefferson County Mental Health Center, Incorporated, of Lakewood, Colorado, the sum of $50,000 in full settlement of all claims of the center against the United States for repayment of amounts the center erroneously refunded to its employees for social security contributions in the period after December 31, 1971, and prior to May 14, 1975, pursuant to instructions by the Internal Revenue Service. (b) LIMITATION.—No part of the amount appropriated in subsection (a) in excess of 10 per centum shall be paid, delivered to, or received by any agent or attorney on account of services rendered in connection with this claim, and the same shall be unlawful, any contract to the contrary notwithstanding. Any person violating the provisions of this subsection shall be guilty of a misdemeanor and, upon conviction thereof be fined any sum not exceeding $1,000. SEC. 29L ALASKA NATIVE CORPORATIONS.

26 USC 4994.

Paragraph (2) of subsection (d) of section 4994 of subpart B of chapter 45 (relating to windfall profit tax on domestic crude oil; categories of oil) is amended by striking "under" the first time it appears and inserting in lieu thereof "pursuant to". SEC. 292. AWARDING OF COSTS AND CERTAIN FEES.

26 USC 743L 26 USC 7430.

(a) IN GENERAL.—Subchapter B of chapter 76 (relating to proceedings by taxpayers and third parties) is amended by redesignating section 7430 as section 7431 and by inserting after section 7429 the following new section: "SEC. 7430. AWARDING OF COURT COSTS AND CERTAIN FEES.

"(a) IN GENERAL.—In the case of any civil proceeding which is— "(1) brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, and "(2) brought in a court of the United States (including the Tax Court), the prevailing party may be awarded a judgment for reasonable litigation costs incurred in such proceeding. "(b) LIMITATIONS.— "(1) MAXIMUM DOLLAR AMOUNT.—The amount of reasonable

litigation costs which may be awarded under subsection (a) with respect to any prevailing party in any civil proceeding shall not exceed $25,000. "(2)

REQUIREMENT

THAT

ADMINISTRATIVE

REMEDIES

BE

EXHAUSTED.—A judgment for reasonable litigation costs shall not be awarded under subsection (a) unless the court determines that the prevailing party has exhausted the administrative

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 573

remedies available to such party within the I n t e r n a l Revenue Service. "(3) O N L Y COSTS ALLOCABLE TO THE UNITED STATES.—An a w a r d

under subsection (a) shall be made only for reasonable litigation costs which a r e allocable to the United States and not to any other party to the action or proceeding. "(4) EXCLUSION OF DECLARATORY J U D G M E N T PROCEEDINGS.—

"(A) IN GENERAL.—No award for reasonable litigation costs may be made under subsection (a) with respect to any declaratory j u d g m e n t proceeding. "(B) EXCEPTION FOR SECTION 5 0 1 (C)(3) DETERMINATION REVOCATION P R O C E E D I N G S. — Subparagraph (A) shall not

apply to any proceeding which involves the revocation of a determination that the organization is described in section 501(c)(3). "(c) DEFINITIONS.—For purposes of this section— "(1) REASONABLE LITIGATION COSTS.—

"(A) IN GENERAL.—The term 'reasonable litigation costs' includes— "(i) reasonable court costs, "(ii) the reasonable expenses of expert witnesses in connection with the civil proceeding, "(iii) the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party ' s case, and "(iv) reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding. "(B) ATTORNEY'S FEES.—In the case of any proceeding in

the Tax Court, fees for the services of a n individual (whether or not an attorney) who is authorized to practice before the Tax Court shall be treated as fees for the services of an attorney. "(2) P R E V A I L I N G PARTY.—

"(A) IN GENERAL.—The term 'prevailing party' means any party to any proceeding described in subsection (a) (other than the United States or any creditor of the tax p a y e r involved) which— "(i) establishes that the position of the United States in the civil proceeding was unreasonable, and "(ii)(I) has substantially prevailed with respect to the a m o u n t in controversy, or "(II) has substantially prevailed with respect to the most significant issue or set of issues presented. "(B)

DETERMINATION

AS TO PREVAILING

PARTY.—Any

determination under subparagraph (A) as to w h e the r a party is a prevailing party shall be made— "(i) by the court, or "(ii) by a g r e e m e n t of the parties. "(3) CIVIL ACTIONS.—The term 'civil proceeding' includes a civil action. "(d)| MULTIPLE ACTIONS.—For purposes of this section, in the case of— "(1) multiple actions which could have been joined or consolidated, or

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Page:United States Statutes at Large Volume 96 Part 1.djvu/616

 96 STAT. 574

PUBLIC LAW 97-248—SEPT. 3, 1982 "(2) a case or cases involving a return or returns of the same taxpayer (including joint returns of married individuals) which could have been joined in a single proceeding in the same court, such actions or cases shall be treated as one civil proceeding regardless of whether such joinder or consolidation actually occurs, unless the court in which such action is brought determines, in its discretion, that it would be inappropriate to treat such actions or cases as joined or consolidated for purposes of this section. "(e) RIGHT OF APPEAL.—An order granting or denying an award for reasonable litigation costs under subsection (a), in whole or in part, shall be incorporated as a part of the decision or judgment in the case and shall be subject to appeal in the same manner as the decision or judgment. "(f) TERMINATION.—This section shall not apply to any proceeding commenced after December 31, 1985." (b) PENALTY FOR USING TAX COURT PROCEEDINGS FOR DELAY; PENALTY FOR FRIVOLOUS OR GROUNDLESS PROCEEDING.—The first

26 USC 6673.

sentence of section 6673 (relating to damages assessable by instituting proceedings before the Tax Court merely for delay) is amended to read as follows: "Whenever it appears to the Tax Court that proceedings before it have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceedings is frivolous or groundless, damages in an amount not in excess of $5,000 shall be awarded to the United States by the Tax Court in its decision.". (c) APPLICATION WITH TITLE 28.—Section 2412 of title 28, United States Code, is amended by adding at the end thereof the following new subsection: "(e) The provisions of this section shall not apply to any costs, fees, and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1954 applies (determined without regard to subsections (b) and (f) of such section). Nothing in the preceding sentence shall prevent the awarding under subsection (a) of section 2412 of title 28, United States Code, of costs enumerated in section 1920 of such title (as in effect on October 1, 1981).". (d) CONFORMING AMENDMENTS.—

(1) The table of sections for subchapter B of chapter 76 is amended by striking out the item relating to section 7430 and inserting the following new items: "Sec. 7430. Awarding of court costs and certain fees. "Sec. 7431. Cross references.".

26 USC 6673.

(2)(A) The section heading of section 6673 is amended by striking out "MERELY FOR DELAY." and inserting in lieu thereof "PRIMARILY FOR DELAY, ETC.".

(B) The table of sections for subchapter B of chapter 68 is amended by striking out "merely for delay." in the item relating to section 6673 and inserting in lieu thereof "primarily for delay, etc.". 26 USC 7430

note.

(e) EFFECTIVE D A T E S. —

(1) I^f GENERAL.—The amendments made by this section shall apply to civil actions or proceedings commenced after February 28, 1983. (2) PENALTY.—The amendments made by subsections (b) and (d)(2) shall apply to any action or proceeding in the Tax Court commenced after December 31, 1982.

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 575

SEC. 293. TREATMENT OF CERTAIN LENDING OR FINANCE BUSINESSES FOR PURPOSES OF THE TAX ON PERSONAL HOLDING COMPANIES. (a) REMOVAL OF LIMITATION ON A M O U N T OF ORDINARY GROSS INCOME F R O M L E N D I N G OR F I N A N C E BUSINESS T A K E N INTO

ACCOUNT.—Clause (ii) of section 542(c)(6)(C) (relating to exceptions from definition of personal holding company) is amended by striking out "but not $1,000,000".

26 USC 542.

(b) C H A N G E S IN DEFINITION OF L E N D I N G OR F I N A N C E B U S I N E S S. —

Clause (i) of section 542(d)(1)(B) (relating to exceptions from definition of lending or finance business) is amended to read as follows: "(i) making loans, or purchasing or discounting accounts receivable, notes, or installment obligations, if (at the time of the loan, purchase, or discount) the r e m a i n i n g m a t u r i t y exceeds 144 months; unless— "(I) the loans, notes, or installment obligations a r e evidenced or secured by contracts of conditional sale, chattel mortgages, or chattel lease a g r e e m e n t s arising out of the sale of goods or services in the course of the borrower's or transferor's trade or business, or "(II) the loans, notes, or installment obligations a r e m a d e or acquired by the tax p a y e r and meet the requirements of subparagraph (C), or". (c) INDEFINITE MATURITY CREDIT T R A N S ACTION S. — Paragraph (1) of

section 542(d) (relating to special rules) is amended by adding a t the end thereof the following new subparagraph: "(C)

INDEFINITE

MATURITY

CREDIT

TRANSACTIONS.—For

purposes of subparagraph (B)(i), a loan, note, or installment obligation meets the requirements of this subparagraph if it is m a d e under a n agreement— "(i) under which the creditor agrees to m a k e loans or advances (not in excess of a n agreed upon maximum a m o u n t) from time to t i m e to or for the account of the debtor upon request, and "(ii) under which the debtor may repay the loan or advance in full or in installments. " (d) EFFECTIVE D A T E S. —

26 USC 542 note.

(1) SUBSECTION (a).—The amendment m a d e by subsection (a) shall apply to taxable year s beginning after December 31, 1981. (2) SUBSECTIONS

(b)

AND (C). — The amendments

made

by

subsections (b) and (c) shall apply to taxable years beginning after December 31, 1980. SEC. 294. ADDITIONAL REFUNDS RELATING TO REPEAL OF EXCISE TAX ON BUSES. (a) T I M E FOR F I L I N G C L A I M. — Subparagraph (C) of section 231(c)(2)

of the Energy Tax Act of 1978 (relating to refunds with respect to 26 USC 4063 certain consumer purchases) is amended by striking out " the first "°^®day of such 10th calendar month " and inserting in lieu thereof "December 31, 1982". (b) PROCEDURE FOR PASSING T H R O U G H R E F U N D. — Subparagraph (A)

of section 231(c)(2) of such Act is amended by inserting before the semicolon ", or, in lieu of evidence of reimbursement, he m a k e s such reimbursement simultaneously with the receipt of such a refund under an a r r a n g e m e n t satisfactory to such Secretary which assures such simultaneous reimbursement ".

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Page:United States Statutes at Large Volume 96 Part 1.djvu/618

 96 STAT. 576

PUBLIC LAW 97-248—SEPT. 3, 1982

TITLE III—TAXPAYER COMPLIANCE Subtitle A—Withholding on Interest and Dividends SEC. 301. WITHHOLDING ON INTEREST AND DIVIDENDS.

Chapter 24 (relating to collection of income tax at source on wages) is amended by adding at the end thereof the following new subchapter: "Subchapter B—Withholding From Interest and Dividends "Sec. 3451. Income tax collected at source on interest, dividends, and patronage dividends. "Sec. 3452. Exemptions from withholding. "Sec. 3453. Payor defined. "Sec. 3454. Definitions of interest, dividend, and patronage dividend. "Sec. 3455. Other definitions and special rules. "Sec. 3456. Administrative provisions. 26 USC 3451.

«SEC. 3451. INCOME TAX COLLECTED AT SOURCE ON INTEREST, DIVIDENDS. AND PATRONAGE DIVIDENDS. "(a) REQUIREMENT OP WITHHOLDING.—Except as otherwise pro-

vided in this subchapter, the payor of any interest, dividend, or patronage dividend shall withhold a tax equal to 10 percent of the amount of the payment. "(b) SPECIAL RULES.— "(1) TIME OF WITHHOLDING.—Except as otherwise provided in

this subchapter, for purposes of this subchapter— "(A) any payment of interest, dividend, or patronage dividend shall be treated as made, and "(B) the tax imposed by this section shall be withheld, at the time such interest, dividend, or patronage dividend is paid or credited. "(2) PAYEE UNKNOWN.—If a payor is unable to determine the

person to whom any interest, dividend, or patronage dividend is payable or creditable, the tax under this section shall be withheld at the time withholding would be required under paragraph (1) if the payee were known and were an individual. "(3) AMOUNT OF DIVIDEND, ETC., UNKNOWN.—

"(A) IN GENERAL.—If the payor is unable to determine the portion of a distribution which is a dividend, the tax under this section shall be computed on the gross amount of the distribution. To the extent provided in regulations, a similar rule shall apply in the case of interest and patronage dividends. "(B) DISTRIBUTIONS WHICH ARE NOT DIVIDENDS.—To the

extent provided in regulations, this section shall not apply to the extent that the portion of a distribution which is not a dividend may reasonably be estimated. "(4) WITHHOLDING FROM ALTERNATIVE SOURCE.—The Secretary

shall prescribe regulations setting forth the circumstances under which the tax imposed by this section may be paid from

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 577

an account or source other than the payment which gives rise to the liability for tax. "(c) LIABILITY FOR P A Y M E N T. —

"(1) PAYOR LIABLE.—Except a s otherwise provided in this subchapter, the payor— "(A) shall be liable for the payment of the tax imposed by this section which such payor is required to withhold under this section, and "(B) shall not be liable to any person (other than the United States) for the a m o u n t of any such payment. "(2) R E L I A N C E ON EXEMPTION CERTIFICATES.—The payor shall

not be liable for the payment of tax imposed by this section which such payor is required to withhold under this section if— "(A) such payor fails to withhold such tax, and "(B) such failure is d u e to reasonable reliance on a n exemption certificate delivered to such payor under section 3452(f) which is in effect with respect to the payee a t the time such tax is required to be withheld under this section. SEC. 3452. EXEMPTIONS FROM WITHHOLDING.

26 USC 3452.

"(a) IN GENERAL.—Section 3451 shall not apply with respect to— "(1) any payment to a n exempt individual, "(2) any payment to a n exempt recipient, "(3) any m i n i m a l interest payment, or "(4) any qualified consumer cooperative payment. "(b) E X E M P T INDIVIDUALS.—

"(1) IN GENERAL.—For purposes of this section, the term 'exempt individual' means any individual— "(A) who is described in paragraph (2), and "(B) with respect to whom a n exemption certificate is in effect. "(2) INDIVIDUALS DESCRIBED IN THIS PARAGRAPH.—An

indi-

vidual is described in this paragraph if— "(A) such individual's income tax liability for the preceding taxable year did not exceed $600 ($1,000 in the case of a joint r e t u r n under section 6013), or "(B)(i) such individual is 65 or older, and "(ii) such individual's income tax liability for the preceding taxable year did not exceed $1,500 ($2,500 in the case of a joint r e t u r n under section 6013). "(3) SPECIAL RULE FOR MARRIED PERSONS.—A h u s b and and wife

shall each be treated as satisfying the requirements of paragraph (2)(B)(i) if— "(A) either spouse is 65 or older, and "(B) such husband and wife made a joint r e t u r n under section 6013 for the preceding taxable year. "(4) SPECIAL RULE FOR CERTAIN TRUSTS DISTRIBUTING CUR-

RENTLY.—Under regulations, a trust— "(A) the term s of which provide that all of its income is required to be distributed currently, and "(B) all the beneficiaries of which a r e individuals described in paragraph (2) or organizations described in subsection (c)(2)(B), shall be t r e a t e d a s a n individual described in paragraph (2). "(5) I N C O M E TAX LIABILITY.—For purposes of t h i s subsection,

the term 'income tax liability' means the a m o u n t of the tax imposed by subtitle A for the taxable year, reduced by the sum

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Page:United States Statutes at Large Volume 96 Part 1.djvu/620

 96 STAT. 578 26 USC 31, 39, ^^-

PUBLIC LAW 97-248—SEPT. 3, 1982 of the credits allowable against such tax (other than credits allowable by sections 31, 39, and 43). "(c) E X E M P T R E C I P I E N T S. —

"(1) IN GENERAL.—For purposes of this section, the term 'exempt recipient' means any person described in paragraph (2)"(A) with respect to whom a n exemption certificate is in effect, or "(B) w h o is described in regulations prescribed by the Secretary which permit exemption from withholding without certification. "(2) P E R S O N S DESCRIBED I N THIS PARAGRAPH. — A

15 USC 80a-51.

person

is

described in this paragraph if such person is— "(A) a corporation, "(B) a n organization e x e m p t from taxation under section 501(a) or a n individual retirement plan, "(C) the United States or a State, "(D) a foreign government or international organization, "(E) a foreign c e n t r a l b a n k of issue, "(F) a dealer in securities or commodities required to register as such under the laws of the United States or a State, "(G) a real estate investment t r u s t (as defined in section 856), "(H) a n entity registered a t all times during the taxable year under the Investment Company Act of 1940, "(I) a common t r u s t fund (as defined in section 584(a)), "(J) a nominee or custodian (except as otherwise provided in regulations), "(K) to the e x t e n t provided in regulations— "(i) a financial institution, "(ii) a broker, or "(iii) any other person specified in such regulations, who collects any interest, dividend, or p a t r o n a g e dividend for the payee or otherwise acts a s a middleman between the payor and payee, or "(L) any t r u s t which— "(i) is exempt from tax under section 664(c), or "(ii) is described in section 4947(a)(1). "(3) PAYOR MAY REQUIRE CERTIFICATION.—A person described

in paragraph (1)(B) shall not be treated as an exempt recipient for purposes of this section with respect to any payment of such payor if— "(A) a n exemption certificate is not in effect with respect to such person, and "(B) the payor does not t r e a t such person as a n exempt recipient. "(d) M I N I M A L INTEREST P A Y M E N T S. —

"(1) IN GENERAL.—For purposes of this section, the term 'minimal interest payment ' means any payment of interest— "(A) with respect to which a n election by the payor made under paragraph (3) is in effect, and "(B) which— "(i) does not exceed $150, and "(ii) if determined for a 1-year period would not exceed $150.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/621

 PUBLIC LAW 97-248—SEPT. 3, 1982 "(2) AGGREGATION

96 STAT. 579

O F PAYMENTS TO SAME PAYEE.—To

the

e x t e n t provided in regulations prescribed by the Secretary, payments of interest by a payor to the s a m e payee shall be aggregated for purposes of applying paragraph (1)(B). "(3) ELECTION. —

"(A) IN GENERAL.—Any payor may m a k e a n election under this paragraph with respect to any type of interest payments. '(B) EFFECTIVE U N T I L REVOKED.—Except a s provided

in

regulations prescribed by the Secretary, a n election m a d e by any person under this paragraph shall r e m a i n in effect until revoked by such person. "(C) T I M E AND M A N N E R. — Any election or revocation of a n election m a d e under this paragraph shall be m a d e a t such t i m e and in such m a n n e r a s the Secretary shall prescribe by regulations. "(e) Q U A L I F I E D C O N S U M E R COOPERATIVE P A Y M E N T. — For purposes

of this section, the term 'qualified consumer cooperative payment ' means any payment by a cooperative which is exempt from reporting requirements under section 6044(a) by reason of section 6044(c). "(f) E X E M P T I O N CERTIFICATES.— "(1) IN GENERAL. —

"(A) DELIVERY.—An exempt individual or exempt recipient may deliver a n exemption certificate to a payor a t any time. Such certificate shall be in such form and contain such information as the Secretary shall prescribe. "(B) C H A N G E OF STATUS.—Any person who ceases to b e a n exempt individual or exempt recipient shall, not later than the close of the 10th day after the date of such cessation, notify each payor with whom such person has a n exemption certificate of such change in status. No notice shall be required under the preceding sentence with respect to any payor if it reasonably a p p e a r s that the person will not thereafter receive a payment of interest, dividends, or p a t r o n a g e dividends from such payor. "(2) EFFECTIVENESS OF CERTIFICATES.—

"(A) GENERAL RULE.—Except a s otherwise provided in regulations prescribed by the Secretary, a n exemption certificate shall be effective until— "(i) revoked, or "(ii) notice of change in s t a t u s is provided pursuant to paragraph (1)(B). "(B) W H E N

CERTIFICATE TAKES EFFECT.—The

Secretary

shall prescribe regulations setting forth— "(i) the d a y on which a filed exemption certificate shall be considered effective, and "(ii) the circumstances under which a payor shall t r e a t a n exemption certificate as having ceased to be effective where the Secretary has determined that the person described therein is not a n exempt individual or exempt recipient. "SEC. 3453. PAYOR DEFINED.

"(a) GENERAL RULE.—Except as otherwise provided in this subchapter, for purposes of this subchapter, the term 'payor' means the person paying or crediting the interest, dividend, or patronage dividend.

26 USC 3453.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/622

 96 STAT. 580

PUBLIC LAW 97-248—SEPT. 3, 1982 "(b) CERTAIN M I D D L E M E N TREATED AS P A Y O R S. — For purposes of

this subchapter— "(1) IN GENERAL.—To the extent provided in regulations— "(A) any custodian for, or nominee of, the payee, "(B) any corporate t r u s t e e of a t r u s t which is the payee, or "(C) any person which collects the payment for the payee or otherwise acts as a middleman between the payor and the payee, shall be treated as a payor with respect to the payment. "(2) RECEIPT TREATED AS PAYMENT.—To the e x t e n t provided in

regulations, any person t r e a t e d as a payor under paragraph (1) shall be treated a s having paid the interest, dividend, or patronage dividend when such person received such a m o u n t. "(c) A G E N T S, E T C. — I n the case of—

"(1) a fiduciary or agent with respect to the payment or crediting of any interest, dividend, or patronage dividend, or "(2) any other person w h o has the control, receipt, custody, or disposal of, or pays or credits any interest, dividend, or patronage dividend for any payor, the Secretary, under regulations prescribed by him, may designate such fiduciary, agent, or other person as a payor with respect to such payment or crediting for purposes of this subchapter. "(d) T R E A T M ENT OF P E R S O N S TO W H O M

SUBSECTION (b) OR (C)

APPLIES.—Any person treated as a payor under subsection (b) or (O— "(1) shall perform such acts as a r e required of a payor (within the m e a n i n g of subsection (a)) and as may be specified by the Secretary, and "(2) shall be treated as a payor for all provisions of law (including penalties) applicable in respect to a payor (within the m e a n i n g of subsection (a)). "(e) R E L I E F F R O M DOUBLE W I T H H O L D I N G. — The Secretary may by

regulations provide that w h e r e any person is treated as a payor under subsection (b) or (c) with respect to any payment, any other person who (but for this subsection) would be t r e a t e d a s a payor with respect to such payment shall be relieved from the requirements of this subchapter to the extent provided in such regulations. "(f) LIABILITY OF T H I R D PARTIES P A Y I N G OR PROVIDING INTEREST, DIVIDENDS, OR P A T R O N A G E DIVIDENDS.—To the e x t e n t provided in

regulations prescribed by the Secretary, rules similar to the rules of section 3505 (relating to liability of third parties paying or providing for wages) shall apply for purposes of this subchapter. For purposes of the preceding sentence, the last sentence of subsection (b) of section 3505 shall be applied by substituting '10 percent' for '25 percent'. 26 USC 3454.

"SEC. 3454. DEFINITIONS OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND. "(a) INTEREST D E F I N E D. — For purposes of t h i s subchapter — "(1) GENERAL RULE. — The term ' i n t e r e s t ' means —

"(A) interest on any obligation in registered form or of a type offered to the public, "(B) interest on deposits with persons carrying on the b a n k i n g business, "(C) a m o u n t s (whether or not designated a s interest) paid by a m u t u a l savings bank, savings and loan association.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/623

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 581

building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares, "(D) interest on amounts held by an insurance company under an agreement to pay interest thereon, "(E) interest on deposits with brokers (as defined in section 6045(c)), and Post, p. 600. "(F) interest paid on amounts held by investment companies (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3)) and on amounts invested in other pooled funds or trusts. '(2) EXCEPTIONS.—The term 'interest' does not include— "(A) interest on any obligation issued by a natural person, "(B) interest on any obligation if such interest is exempt from taxation under section 103(a) or if such interest is exempt from tax (without regard to the identity of the holder) under any other provision of law, "(C) any amount paid on a depository institution taxexempt certificate (as defined in section 128(c)(1) (as in 95 Stat. 267. effect for taxable years beginning before January 1, 1985)), "(D) any amount which is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount, "(E) any amount which would be subject to withholding under subchapter A of chapter 3 by the person paying such amount but for the fact that— "(i) such amount is income from sources outside the United States, "(ii) the payor thereof is excepted from the application of section 1441(a) by reason of section 1441(c) or a tax treaty, or "(iii) such amount is original issue discount (within the meaning of section 1232(b)(1)), "(F) any amount which is exempt from tax under— "(i) section 892 (relating to income of foreign governments and of international organizations), or "(ii) section 895 (relating to income derived by a foreign central bank of issue from obligations of the United States or from bank deposits), "(G) except to the extent otherwise provided in regulations, any amount paid by— "(i) a foreign government or international organization or any agency or instrumentality thereof, "(ii) a foreign central bank of issue, "(iii) a foreign corporation not engaged in trade or business in the United States, "(iv) a foreign corporation, the interest payments of which would be exempt from withholding under subchapter A of chapter 3 if paid to a person who is not a United States person, or "(v) a partnership not engaged in a trade or business in the United States and composed in whole of nonresident aliens, individuals and persons described in clause (i), (ii), or (iii).

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Page:United States Statutes at Large Volume 96 Part 1.djvu/624

 96 STAT. 582

PUBLIC LAW 97-248—SEPT. 3, 1982 "(H) any amount on which the person making payment is required to withhold a tax under section 1451 (relating to tax-free covenant bonds), or would be so required but for section 1451(d) (relating to benefit of personal exemptions), and "(I) except to the extent otherwise provided in regulations, any amount not described in the foregoing provisions of this paragraph which is paid outside the United States and is income from sources outside the United States. "(3) ADJUSTMENT FOR PENALTY BECAUSE OF PREMATURE WITHDRAWAL OF FUNDS FROM TIME SAVINGS ACCOUNTS OR DEPOSITS.—

To the extent provided in regulations, the amount of any interest on a time savings account, certificate of deposit, or similar class of deposits shall be appropriately reduced for purposes of this suchapter by the amount of any penalty imposed for the premature withdrawal of funds. "(b) DIVIDEND DEFINED.—For purposes of this subchapter— "(1) GENERAL RULE.—The term 'dividend' means— "(A) any distribution by a corporation which is a dividend (as defined in section 316), and "(B) any payment made by a stockbroker to any person as a substitute for a dividend (as so defined). "(2) SUBCHAPTER S DISTRIBUTIONS AFTER CLOSE OF YEAR.—The

95 Stat. 287.

term 'dividend' includes any distribution described in section 1375(f) (relating to distributions by electing small business corporations after the close of the taxable year). "(3) EXCEPTIONS.—The term 'dividend' shall not include— "(A) any amount paid as a distribution of stock described in section 305(e)(2)(A) (relating to reinvestment of dividends in stock of public utilities), "(B) any amount which is treated as a taxable dividend by reason of section 302 (relating to redemptions of stock), 306 (relating to disposition of certain stock), 356 (relating to receipt of additional consideration in connection with certain reorganizations), or 1081(e)(2) (relating to certain distributions pursuant to order of the Securities and Exchange Commission), "(C) any amount described in subparagraph (D), (E), or (F) of subsection (a)(2), "(D) to the extent provided in regulations, any amount paid by a foreign corporation not engaged in a trade or business in the United States, "(E) any amount which is a capital gain dividend distributed by— "(i) a regulated investment company (as defined in section 852(b)(3)(C)), or "(ii) a real estate investment trust (as defined in section 857(b)(3)(C)), "(F) any amount which is an exempt-interest dividend of a regulated investment company (as defined in section 852(b)(5)(A)), "(G) any amount paid or treated as paid by a regulated investment company during a year if, under regulations prescribed by the Secretary, it is anticipated that at least 95 percent of the dividends paid or treated as paid during such year (not including capital gain distributions) will be exempt-interest dividends, and

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text: The Liberty to Trade as Buttressed by National Law/Tendency and Power


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Page:United States Statutes at Large Volume 96 Part 1.djvu/625

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 583

"(H) any amount described in section 1373 (relating to undistributed taxable income of electing small business corporations). "(c) PATRONAGE DIVIDEND.—For purposes of this subchapter— "(1) IN GENERAL.—The term 'patronage dividend' means— "(A) the amount of any patronage dividend (as defined in section 1388(a)) which is paid in money, qualified written notice of allocation, or other property (except a nonqualified written notice of allocation), "(B) any amount, described in section 1382(c)(2)(A) (relating to certain nonpatronage distributions), which is paid in money, qualified written notice of allocation, or other property (except nonqualified written notice of allocation) by an organization exempt from tax under section 521 (relating to exemption of farmers' cooperatives from tax), and "(C) any amount paid in money or other property (except written notice of allocation) in redemption of a nonqualified written notice of allocation attributable to any source described in subparagraph (A) or (B). "(2) EXCEPTIONS.—The term 'patronage dividend' shall not include any amount described in subparagraph (D), (E), or (F) of subsection (a)(2). "(3) SPECIAL RULES.—In determining the amount of any patronage dividend— "(A) property (other than a written notice of allocation) shall be taken into account at its fair market value, "(B) a qualified written notice of allocation described in section 1388(c)(1)(A) shall be taken into account at its stated dollar amount, and "(C) a patronage dividend part of which is a qualified written notice of allocation described in section 1388(c)(1)(B) (and not in section 1388(c)(1)(A)) shall be taken into account only if 50 percent or more of such dividend is paid in money or by a qualified check, and any such qualified written notice of allocation which is taken into account after the application of this subparagraph shall be taken into account at its stated dollar amount. "(4) DEFINITIONS.—For purposes of this subsection— "(A)

QUALIFIED WRITTEN NOTICE OF ALLOCATION.—The

term 'qualified written notice of allocation' has the meaning given to such term by section 1388(c). "(B) NONQUALIFIED WRITTEN NOTICE OF ALLOCATION.—The

term 'nonqualified written notice of allocaton' has the meaning given to such term by section 1388(d). "(C) QUALIFIED CHECK.—The term 'qualified check' has the meaning given to such term by section 1388(c)(4). •SEC. 3455. OTHER DEFINITIONS AND SPECIAL RULES.

"(a) DEFINITIONS.—For purposes of this subchapter— "(1) PERSON.—The term 'person' includes any governmental unit and any agency or instrumentality thereof and any international organization. "(2) STATE.—The term 'State' means a State, the District of Columbia, a possession of the United States, any political subdivision of any of the foregoing, and any wholly owned agency or instrumentality of any one or more of the foregoing.

26 USC 3455

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Page:United States Statutes at Large Volume 96 Part 1.djvu/626

 96 STAT. 584

PUBLIC LAW 97-248—SEPT. 3, 1982 "(3) UNITED STATES.—The term 'United States' means the United States and any wholly owned agency or i n s t r u m e n t a l i t y thereof. "(4) FOREIGN G O V E R N M E N T. — The term 'foreign

government'

means a foreign government, a political subdivision of a foreign government, and any wholly owned agency or i n s t r u m e n t a l i t y of any one or more of the foregoing. "(5) INTERNATIONAL ORGANIZATION.—The term

'international

organization' means a n international organization and any wholly owned agency or i n s t r u m e n t a l i t y thereof. "(6) NONRESIDENT ALIEN.—The term 'nonresident alien individual' includes a n alien resident of P u e r to Rico. "(7) W I T H H O L D, ETC., INCLUDE DEDUCT.—The term s 'withhold',

'withholding', and 'withheld' include deduct, deducting, and deducted. "(b) T R E A T M E N T OF O R I G I N A L ISSUE D I S C O U N T. —

Ante, p. 576.

"(1) IN GENERAL.—Except a s provided in paragraph s (2) and (3) the tax imposed by section 3451 shall apply to the a m o u n t of original issue discount on any obligation which is includible in the gross income of the holder during the calendar year. Any such a m o u n t shall be t r e a t e d as a payment for purposes of this subchapter. "(2) TRANSFERRED OBLIGATIONS.—

"(A) IN GENERAL.—In the case of original issue discount on any obligation which has been transferred from the original holder, the tax imposed by section 3451 shall apply to such original issue discount as if the subsequent holder were the original holder. "(B) SPECIAL RULE FOR SHORT-TERM OBLIGATIONS.—In the

case of any obligation with a fixed m a t u r i t y date not exceeding 1 year from the date of issue which has been transferred from the original holder, if any subsequent purchase r establishes the date on which, and the purchase price a t which, h e acquired such obligation, the a m o u n t of original issue discount on such obligation shall be determined (subject to such regulations a s the Secretary may prescribe) as if it were issued on the date such subsequent purchase r acquired such obligation for a n issue price equal to the purchase price a t which such subsequent purchase r acquired such obligation. "(3) LIMITATION ON AMOUNT W I T H H E L D. —

"(A) IN GENERAL.—The a m o u n t of tax imposed by section 3451 on the original issue discount on any obligation which is required to be withheld under section 3451(a) in any c a l e n d a r year shall not exceed the a m o u n t of cash paid with respect to such obligation during such c a l e n d a r year. "(B) AUTHORITY OF SECRETARY TO ELIMINATE LIMITATION IN CERTAIN CASES.—If the Secretary determine s by r e g u l a t i o n s

that a type of obligation is frequently used to avoid the purposes of this subchapter, subparagraph (A) shall not apply with respect to original issue discount on any obligation of such type which is issued more than 30 days after the first date on which such regulations a r e published in the Federal Register. "(C)

PAYMENTS

FROM

WHICH

WITHHOLDING

IS TO BE

MADE.—Except to the extent otherwise provided in regulations, the tax imposed by section 3451 with respect to

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Page:United States Statutes at Large Volume 96 Part 1.djvu/627

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 585

original issue discount for any calendar year shall be withheld from each cash payment made with respect to such obligation during such calendar year in the proportion which the a m o u n t of such payment bears to the aggregate of such payments. "(4) O R I G I N A L ISSUE DISCOUNT DEFINED.—For purposes of t h i s

subsection, the term 'original issue discount' has the m e a n i n g given such term by section 1232(b)(1). "SEC. 3456. ADMINISTRATIVE PROVISIONS.

26 USC 3456.

"(a) R E T U R N AND P A Y M E N T BY G O V E R N M E N T A L U N I T S. — I f

the

payor of any payment subject to withholding under section 3451 is the United States or a State, or a n agency or i n s t r u m e n t a l i t y thereof, the r e t u r n of the tax withheld under this subchapter shall be made by the officer or employee having control of the payment of the a m o u n t subject to withholding or by any officer or employee appropriately designated to m a k e such withholding. "(b) A N N U A L W I T H H O L D I N G BY F I N A N C I A L INSTITUTIONS.—

"(1) IN GENERAL.—Under regulations prescribed by the Secretary, a financial institution described in subparagraph (B) or (C) of section 3454(a)(1) may elect to defer withholding of the tax Ante, p. 580. imposed by section 3451 during any calendar year on interest paid on savings accounts, interest-bearing checking accounts, and similar accounts until a date which is not later than the last day of such year. "(2) CONDITION FOR ELECTION.—The

regulations

prescribed

under paragraph (1) shall provide that a n election under such paragraph is conditional on a g r e e m e n t by the person making the election— "(A) that the balance in any account subject to such election shall a t no time be less than a n a m o u n t equal to the tax under section 3451 which would have been withheld as of such t i m e if such election were not in effect, and "(B) that if a n account subject to such election is closed before the date on which the tax under section 3451 would (but for this subparagraph) be withheld as a result of such an election, the tax shall be withheld before the time of closing such account. "(c) T A X P A I D

BY R E C I P I E N T. — I f

a

payor,

in

violation

of

the

provisions of this subchapter, fails to withhold the tax imposed under section 3451, and thereafter the tax against which such tax may be credited is paid, the tax so required to be withheld shall not be collected from the payor; b u t this subsection shall in no case relieve the payor from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to withhold. "(d) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subchapter." SEC. 302. CREDIT AGAINST TAX. (a) IN GENERAL.—Section 31 (relating to tax withheld on wages) is 26 USC 31. amended to read a s follows: "SEC.

31. TAX WITHHELD ON WAGES, INTEREST. DIVIDENDS. AND PATRONAGE DIVIDENDS.

"(a) W A G E WITHHOLDING.—The a m o u n t withheld under section 3402 as tax on the wages of any individual shall be allowed to the

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Page:United States Statutes at Large Volume 96 Part 1.djvu/628

 96 STAT. 586

PUBLIC LAW 97-248—SEPT. 3, 1982 recipient of the income as a credit against the tax imposed by this subtitle. "(b)

W I T H H O L D I N G F R O M INTEREST, DIVIDENDS, AND P A T R O N A G E

DIVIDENDS.—The a m o u n t withheld under section 3451 as tax on interest, dividends, and p a t r o n a g e dividends shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle. "(c) CREDIT FOR SPECIAL R E F U N D S OF SOCIAL SECURITY T A X. — The

Secretary may prescribe regulations providing for the crediting against the tax imposed by this subtitle of the a m o u n t determined by the tax p a y e r or the Secretary to be allowable under section 6413(c) as a special refund of tax imposed on wages. The a m o u n t allowed as a credit under such regulations shall, for purposes of this subtitle, be considered a n a m o u n t withheld a t source as tax under section 3402. "(d) Y E A R FOR W H I C H CREDIT A L L O W E D. —

"(1) IN GENERAL.—Except as otherwise provided in paragraph (2), any credit allowed by this section shall be allowed for the tax a b l e year beginning in the c a l e n d a r year in which the a m o u n t was withheld (or, in the case of subsection (c), in which the wages were received). If more than 1 taxable year begins in a c a l e n d a r year, such a m o u n t shall be allowed as a credit for the last taxable year so beginning. "(2) SPECIAL RULE FOR CERTAIN DISTRIBUTIONS OF SUBCHAPTER S

CORPORATIONS.—The a m o u n t withheld with respect to a distribution by an electing small business corporation (within the m e a n i n g of section 1371(b)) which is t r e a t e d as a distribution of such corporation's u n d i s t r i b u t e d taxable income for the preceding year under section 1375(f)(1) shall be allowed as a credit for the taxable year of the recipient beginning in the c a l e n d a r year in which the preceding year of the corporation e n d s. " (b) T R E A T M E N T OF ESTATES AND T R U S T S. —

26 USC 643.

(1) IN GENERAL.—Section 643 (relating to definitions applicable to estates and trusts) is amended by adding a t the end thereof the following new subsection: "(d)

COORDINATION W I T H W I T H H O L D I N G ON INTEREST AND D IV I -

DENDS.—Except to the e x t e n t otherwise provided in regulations, this subchapter shall be applied with respect to payments subject to withholding under subchapter B of chapter 24— "(1) by allocating between the e s t a t e or t r u s t and its beneficiaries any credit allowable under section 31(b) (on the basis of the i r respective s h a r e s of interest, dividends, and p a t r o n a g e dividends t a k e n into account under this subchapter), "(2) by t r e a t i n g each beneficiary to whom such credit is allocated as if an a m o u n t equal to such credit had been paid to him by the e s t a t e or trust, and "(3) by allowing the estate or t r u s t a deduction in an a m o u n t equal to the credit so allocated to beneficiaries." 26 USC 661.

26 USC 6413

(2) TECHNICAL AMENDMENT.—Subsection (a) of section

661

(relating to deduction for estates and t r u s t s a c c u m u l a t i n g income or distributing corpus) is amended by adding a t the end thereof the following new sentence: "For purposes of paragraph (1), the a m o u n t of distributable net income shall be computed without the deduction allowed by section 642(c)." (c) CONFORMING AMENDMENT. — Paragraph (1) of section 6413(c) is amended by striking out "section 31(b)" and inserting in lieu thereof "section 31(c)".

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 PUBLIC LAW 97-248—SEPT. 3, 1982 SFX:.

303. RETURNS REGARDING PAYMENTS PAYMENTS OF INTEREST.

OF

96 STAT. 587

DIVIDENDS

AND

(a) D IV I D E N D S. —

(1) IN GENERAL. — Paragraph (1) of subsection 6042(a) (relating 26 USC 6042. to r e t u r n s r e g a r d i n g payments of dividends) is amended— (A) by striking o u t " o r " a t the end of subparagraph (A), (B) by inserting " o r " a t the end of subparagraph (B), (C) by inserting after subparagraph (B) the following new subparagraph: "(C) who is required to withhold tax under section 3451 Ante, p. 576. on any payment of dividends,", (D) by striking out the period a t the end thereof, and (E) by inserting the following a t the end thereof ", and, in the case of a payment upon which tax is withheld, the a m o u n t of tax withheld." (2) STATEMENTS.—Section 6042(c) (relating to statement s to be furnished to persons with respect to whom information is furnished) is amended— (A) by striking o u t " and " a t the e n d of paragraph (1), (B) by striking out the period a t the end of paragraph (2) and inserting in lieu thereof ", and ", (C) by inserting after paragraph (2) the following paragraph: "(3) the a m o u n t of tax withheld under section 3451.", and (D) by striking o u t " N o statement " in the last sentence thereof and inserting in lieu thereof "Except in the case of a r e t u r n required by reason of subparagraph (C) of subsection (a)(1), no statement ". (3)

DUPLICATE

FILED

WITH

SECRETARY.—Section

6042

is

amended by adding a t the end thereof the following new subsection: "(e) DUPLICATE O F SUBSECTION (C) STATEMENT M A Y B E REQUIRED To B E FILED W I T H SECRETARY.—A d u p l i c a t e of any statement m a d e

pursuant to subsection (c) which is required to set forth a n a m o u n t withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary." (b) INTEREST.—Section 6049 (relating to r e t u r n s regarding payments of interest) is amended by adding a t the end thereof the following new subsection:

Post, p. 591.

"(e) DUPLICATE OF SUBSECTION (C) STATEMENT M A Y B E REQUIRED To B E FILED W I T H SECRETARY.—A d u p l i c a t e of any statement m a d e

pursuant to subsection (c) which is required to set forth a n a m o u n t withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary." SEC. 301. RETURNS REGARDING PAYMENTS OF PATRONAGE DIVIDENDS.

(a) IN GENERAL. — Paragraph (1) of subsection 6044(a) is amended to read as follows: "(1) IN GENERAL.—Except as otherwise provided in this section, every cooperative to which part I of subchapter T of chapter 1 applies which— "(A) m a k e s payments of a m o u n t s described in subsection (b) aggregating $10 or more to any person during any c a l e n d a r year, or "(B) is required to withhold any tax under section 3451, shall m a k e a r e t u r n according to the forms or regulations prescribed by the Secretary, setting forth the aggregate a m o u n t

26 USC 6044.

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 96 STAT. 588

PUBLIC LAW 97-248—SEPT. 3, 1982 of such payments, the name and address of the person to whom paid, and the amount of tax withheld." (b) AMOUNTS SUBJECT TO REPORTING.—Paragraph (1) of section

26 USC 6044.

6044(b) (relating to amounts subject to reporting) is amended by striking out "under subsection (a)", and by inserting "under paragraph (1)(A) or (2) of subsection (a)". (c) STATEMENTS.—Section 6044(e) (relating to statements to be furnished to persons with respect to whom information is furnished) is amended— (1) by striking out "and" at the end of paragraph (1), (2) by striking out the period a t the end of paragraph (2), and inserting ", and" in lieu thereof, (3) by inserting after paragraph (2) the following paragraph: "(3) the amount of tax withheld under section 3451., and (4) by striking out "No statement" in the last sentence thereof and inserting in lieu thereof "Except in the case of a return required by reason of subparagraph (B) of subsection (a)(1), no statement'. (d) DuPUCATE FILED WITH SECRETARY.—Section 6044 is amended by adding a t the end thereof the following new subsection: "(f) DUPUCATE OF SUBSECTION (e) STATEMENT MAY B E REQUIRED TO B E FILED WITH SECRETARY.—A duplicate of any statement made

pursuant to subsection (e) which is required to set forth an amount withheld under section 3451 shall, when required by regulations prescribed by the Secretary, be filed with the Secretary." SEC. 305. DENIAL OF DEDUCTION FOR CERTAIN TAXES. (a) No DEDUCTION FOR TAX WITHHELD AT SOURCE ON INTEREST, DIVIDENDS, AND PATRONAGE DIVIDENDS.—Paragraph (1) of section

26 USC 275.

275(a) (relating to denial of deduction for certain taxes) is amended— (1) by striking out "and" at the end of subparagraph (B), (2) by striking out the period at the end of subparagraph (C) and inserting in lieu thereof "; and", and (3) by inserting after subparagraph (C) the following subparagraph: "(D) the tax withheld at source on interest, dividends, and patronage dividends under section 3451." (b) No DEDUCTION OF TAXES WITHHELD ON INTEREST AND DIVIDENDS IN DETERMINING TAXABLE INCOME.—Subsection (b) of section

26 USC 3502.

26 USC 6682. 26 USC 7205.

3502 (relating to the nondeductibility of taxes in computing taxable income) is amended— (1) by striking out "under chapter 24" and inserting in lieu thereof "under subchapter A of chapter 24", and (2) by adding at the end thereof the following new subsection: "(c) The tax withheld under subchapter B of chapter 24 shall not be allowed as a deduction in computing taxable income under subtitle A either to the person withholding the tax or to the recipient of the amounts subject to withholding." SEC. 306. PENALTIES. (a) CIVIL PENALTY.—Paragraph (1) of section 6682(a) (relating to false information with respect to withholding) is amended by inserting "or section 3452(fKl)(A)" after "section 3402". (b) CRIMINAL PENALTY.—Section 7205 (relating to fraudulent withholding exemption certificate or failure to supply information) is amended—

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 589

(1) by striking out " Any individual" and inserting in lieu thereof

"(a) W I T H H O L D I N G ON W A G E S. — Any i n d i v i d u a l ",

and

(2) by adding a t the end thereof the following new subsection: "(b)

WITHHOLDING

OF INTEREST

AND D IV I D E N D S. — Any

person

who— "(1) willfully files an exemption certificate with any payor under section 3452(D(1)(A), which is known by him to be fraudulent or to be false as to any material m a t t e r, or "(2) is required to furnish notice under section 3452(f)(l(B), and willfully fails to furnish such notice in the m a n n e r and at the time required pursuant to section 3452(0(1)(B) or the regulations prescribed the r e under, shall, in lieu of any penalty otherwise provided, upon conviction thereof, be fined not more than $500, or imprisoned not more than 1 year, or both."

•Ante, p. 577.

SKC. 307. CONFORMING AND CLP:RICAL AMENDMENTS. (a) CONFORMING AMENDMENTS. —

(1) Paragraph (3) of section 274(e) (relating to disallowance of certain enter t a i n m e n t, etc., expenses) is amended by inserting "subchapter A o f before " chapter 24". (2) Section 3403 (relating to liability for tax) is amended by striking out "this chapter " and inserting in lieu thereof "this subchapter". (3) Paragraph (4) of section 3507(d) (relating to advance payment of earned income credit) is amended by inserting "subchapter A o f before "chapter 24". (4) Subchapter (B) of section 6013(g)(1) (relating to joint r e t u r n s of income tax by husband and wife) is amended by striking out "(relating to wage withholding)" and by inserting in lieu thereof "(relating to withholding on wages, interest, dividends, and patronage dividends)" and by striking out "of wages". (5) Paragraph (1) of section 6013(h) is amended by striking out "(relating to wage withholding)" and inserting in lieu thereof "(relating to withholding on wages, interest, dividends, and patronage dividends)" and by striking out "of wages". (6) Paragraph (1) of section 6015(j) (relating to declaration of estimated income tax by individuals) is amended by striking out ", as defined in section 3401(a)," and inserting in lieu thereof "(as defined in section 3401(a)), or to the interest, dividends, and patronage dividends (as defined in section 3454),". (7) Subparagraph (A) of section 6051(f)(1) (relating to receipts for employees) is amended by inserting "subchapter A o f before "chapter 24". (8) Paragraph (2) of section 6365(c) (relating to definitions and special rules for purposes of the collection of State individual income taxes) is amended by inserting ", interest, dividends, and patronage dividends" before "paid on or after such date". (9) Subsection (b) of section 6401 (relating to a m o u n t s treated as overpayments) is amended by inserting ", interest, dividends, and patronage dividends" after "tax withheld on wages". (10) Paragraph (1) of section 6413(a) (relating to special credit and refund rules applicable to certain employment taxes) is amended by striking out "or 3402 is paid with respect to any payment of r e m u n e r a t i o n, " and inserting in lieu thereof "3402

26 USC 274. 26 USC 3403. 26 USC 3507. 26 USC 6013.

95 Stat. 345.

26 USC 6051. 26 USC 6365.

26 USC 6401. 26 USC 6413.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/632

 96 STAT. 590

26 USC 6413.

PUBLIC LAW 97-248—SEPT. 3, 1982 or 3451 is paid with respect to any payment of remuneration, interest, dividends, or other amounts,". (11) Subsection (b) of section 6413 is amended— (A) by striking from the heading of such subsection the words "OF CERTAIN EMPLOYMENT TAXES", and (B) by striking out "or 3402 is paid or deducted with respect to any payment of remuneration" and inserting in lieu thereof "3402 or 3451 is paid or deducted with respect to any payment of remuneration, interest, dividends, or other amount". (12) The heading for section 6413 is amended to read as follows: "SEC. 6413. SPECIAL RULES APPLICABLE TO CERTAIN TAXES UNDER SUBTITLE C."

(13) The table of sections for subchapter B of chapter 65 is amended by striking out the item relating to section 6413 and inserting in lieu thereof the following: "Sec. 6413. Special rules applicable to certain taxes under subtitle C."

26 USC 6654.

26 USC 7215.

26 USC 7654. 26 USC 7701.

(14) Subsections (e)(1) and (g)(3) of section 6654 (relating to failure by individuals to pay estimated income tax) are amended by inserting ", interest, dividends, and patronage dividends" after "tax withheld at source on wages". (15) The last sentence of section 7215(b) (relating to offenses with respect to collected taxes) is amended to read as follows: "For purposes of paragraph (2), a lack of funds existing immediately after the payment of wages or amounts subject to withholding under subchapter B of chapter 24 (whether or not created by the payment of such wages or amounts) shall not be considered to be circumstances beyond the control of a person." (16) Subsection (d) of section 7654 (relating to coordination of United States and Guam individual income taxes) is amended by inserting "subchapter A o f before "chapter 24". (17)^ Section 7701(a)(16) (defining the term "withholding agent") is amended by striking out "or 1461" and inserting in lieu thereof "1461 or 3451". (b) CLERICAL AMENDMENTS.—

(1) The heading of subtitle C is amended to read as follows:

"Subtitle C—Employment Taxes and Collection of Income Tax at Source". (2) The table of subtitles for the Internal Revenue Code of 1954 is amended by striking out the item relating to subtitle C and inserting in lieu thereof the following: "SUBTITLE C. Employment taxes and collection of income tax at source."

(3) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking out the item relating to section 31 and inserting in lieu thereof the following: "Sec. 31. Tax withheld on wages, interest, dividends, and patronage dividends."

(4) Chapter 24 is amended by striking out the chapter heading and inserting in lieu thereof the following:

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 591

"CHAPTER 24—COLLECTION OF INCOME TAX AT SOURCE "SUBCHAPTER A. Withholding from wages. "SUBCHAPTER B. Withholding from interest and dividends.

"Subchapter A—Withholding From Wages'*. (5) The heading for chapter 25 is amended to read a s follows:

"CHAPTER 25—GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES AND COLLECTION OF INCOME TAXES AT SOURCE". (6) The table of chapter s for subtitle C is amended by striking out the items r e l a t i n g to chapter s 24 and 25 and inserting in lieu thereof the following: "CHAPTER 24. Collection of income tax at source. "CHAPTER 25. General provisions relating to employment taxes and collection of income taxes at source." SEC. 308. EFFECTIVE DATES; SPECIAL RULES.

26 USC 3451 note.

(a) IN GENERAL.—Except as otherwise provided in this section, the amendments m a d e by this part shall apply to payments of interest, dividends, and p a t r o n a g e dividends paid or credited after June 30, 1983. (b) DELAY I N APPLICATION TO CERTAIN P A Y O R S. — The Secretary of

the Treasury shall prescribe such regulations which delay (but not beyond December 31, 1983) the application of some or all of the provisions of subchapter B of chapter 24 of the I n t e r n a l Revenue Code of 1954 to any payor until such t i m e as such payor is able to comply without undue h a r d s h i p with the requirements of such provisions. (c) TEMPORARY RULE FOR CERTAIN W I T H H O L D I N G E X E M P T I O N S. —

U n t i l regulations a r e prescribed by the Secretary of the Treasury or his delegate under section 3452(c)(1)(B) of the I n t e r n a l Revenue Code of 1954 (as added by this part), the payor may t r e a t any person whose n a m e reasonably indicates that such person is described in paragraph (2) of section 3452(c) of such Code (other than subparagraph (J) or (K) thereof) as a n exempt recipient.

^"^^' P- ^'^'^•

(d) DELAY IN M A K I N G DEPOSITS.—The t i m e for making deposits

under section 6302 of the I n t e r n a l Revenue Code of 1954 of the tax imposed by section 3451 of such Code which is withheld by any person shall, to the e x t e n t provided in regulations, t a k e into account the cost to such person of instituting a withholding system in order to comply with subchapter B of chapter 24 of such Code.

Subtitle B — I m p r o v e d Information Reporting PART I—EXPANDED REPORTING SEC. 309. REPORTING OF INTEREST.

(a) GENERAL RULE.—Section 6049 (relating to r e t u r n s regarding payments of interest) is amended to read as follows:

26 USC 6049.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/634

 96 STAT. 592

PUBLIC LAW 97-248—SEPT. 3, 1982 "SKC. 6019. RETURNS REGARDING PAYMENTS OF INTEREST. "(a) REQUIREMENT OF R E P O R T I N G. — E v e r y person—

"(1) who m a k e s payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, "(2) who receives payments of interest (as so defined) as a nominee and who m a k e s payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, or "(3) who is required under subchapter B of chapter 24 to withhold tax on the payment of any interest, shall m a k e a r e t u r n according to the forms or regulations prescribed by the Secretary, setting forth the aggregate a m o u n t of such payments, tax deducted and withheld, and the n a m e and address of the person to whom paid or from whom withheld. "(b) INTEREST D E F I N E D. — "(1) GENERAL RULE. — For purposes of subsection (a), the term

Post, p. 600.

Ante, p. 577.

'interest' means — "(A) interest on any obligation— "(i) issued in registered form, or "(ii) of a type offered to the public, other than any obligation with a m a t u r i t y (at issue) of not more than 1 year which is held by a corporation, "(B) interest on deposits with persons carrying on the b a n k i n g business, "(C) a m o u n t s (whether or not designated as interest) paid by a m u t u a l savings b a n k, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or similar organization, in respect of deposits, investment certificates, or withdrawable or r e p u r c has a b l e shares, "(D) interest on a m o u n t s held by a n insurance company under a n a g r e e m e n t to pay interest thereon, "(E) interest on deposits with brokers (as defined in section 6045(c)), "(F) interest paid on a m o u n t s held by investment companies (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3)) and on a m o u n t s invested in other pooled funds or trusts, and "(G) to the extent provided in regulations prescribed by the Secretary, any other interest (which is not described in paragraph (2)). "(2) EXCEPTIONS.—For purposes of subsection (a), the term 'interest' does not include— "(A) interest on any obligation issued by a n a t u r a l person, "(B) interest on any obligation if such interest is exempt from tax under section 103(a) or if such interest is exempt from tax (without regard to the identity of the holder) under any other provision of law, "(C) except to the extent otherwise provided in regulations— "(i) any a m o u n t paid to any person referred to in paragraph (2) of section 3452(c) (other than subparagraph s (J) and (K) thereof), or

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Page:United States Statutes at Large Volume 96 Part 1.djvu/635

 PUBLIC LAW 97-248—SEPT. 3, 1982 "(ii) any a m o u n t described in section 3454(a){2)(D) or (E), "(D) except to the extent otherwise provided in regulations, any a m o u n t not described in subparagraph (C) of this paragraph which is income from sources outside the United States or which is paid by— "(i) a foreign government or international organization or any agency or i n s t r u m e n t a l i t y thereof, "(ii) a foreign central bank of issue, "(iii) a foreign corporation not engaged in a trade or business in the United States, "(iv) a foreign corporation, the interest payments of which would be exempt from withholding under subchapter A of chapter 3 if paid to a person who is not a United States person, or "(v) a partnership not engaged in a trade or business in the United States and composed in whole of nonresident alien individuals and persons described in clause (i), (ii), or (iii), and "(E) any a m o u n t on which the person making payment is required to deduct and withhold a tax under section 1451 (relating to tax-free covenant bonds), or would be so required but for section 1451(d) (relating to benefit of personal exemptions). "(3)

P A Y M E N T S BY UNITED STATES NOMINEES, ETC., OF UNITED

STATES PERSON.—If, within the United States, a United States person— "(A) collects interest (or otherwise acts as a middleman between the payor and payee) from a foreign person described in paragraph (2)(D) or collects interest from a United States person which is income from sources outside the United States for a second person who is a United States person, or "(B) makes payments of such interest to such second United States person, notwithstanding paragraph (2)(D), such payment shall be subject to the requirements of subsection (a) with respect to such second United States person. "(c) STATEMENTS TO B E F U R N I S H E D TO PERSONS W I T H RESPECT TO W H O M INFORMATION IS F U R N I S H E D. —

"(1) IN GENERAL.—Every person making a r e t u r n under subsection (a) shall furnish to each person whose n a m e is set forth in such r e t u r n a written statement showing— "(A) the n a m e and address of the person making such return, "(B) the aggregate a m o u n t of payments to, or the aggregate a m o u n t includible in the gross income of, the person as shown on such r e t u r n, and "(C) the aggregate a m o u n t of tax deducted and withheld with respect to such person under subchapter B of chapter 24. "(2)

STATEMENT MUST BE FURNISHED ON OR BEFORE JANUARY

31.—The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the r e t u r n under subsection (a) was made.

96 STAT. 593

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 96 S T A T. 594

P U B L I C L A W 9 7 - 2 4 8 — S E P T. 3, 1982 "(3)

N o STATEMENT REQUIRED WHERE INTEREST IS LESS THAN

$10.—No statement with respect to payments of interest to any person shall be required to be furnished to any person under this subsection if the aggregate a m o u n t of payments to such person shown on the r e t u r n m a d e with respect to paragraph (1) or (2), as the case may be, of subsection (a) is less than $10, "(d)

DEFINITIONS

AND SPECIAL

RULES.—For

purposes

of

this

section— "(1) P E R S O N. — The term 'person' includes any government a l unit and any agency or i n s t r u m e n t a l i t y thereof and any international organization and any agency or i n s t r u m e n t a l i t y thereof. "(2) OBLIGATION.—The term 'obligation' includes bonds, debentures, notes, certificates, and other evidences of indebtedness. "(3) P A Y M E N T S BY GOVERNMENTAL U N I T S. — I n the case of pay-

m e n t s made by any government a l unit or any agency or instrumentality thereof, the officer or employee having control of the payment of interest (or the person appropriately designated for purposes of this section) shall m a k e the r e t u r n s and statement s required by this section. "(4) F I N A N C I A L INSTITUTIONS, BROKERS, ETC., COLLECTING INTEREST MAY BE SUBSTITUTED FOR PAYOR.—To the e x t e n t and in the

m a n n e r provided by regulations, in the case of any obligation— "(A) a financial institution, broker, or other person specified in such regulations which collects interest on such obligation for the payee (or otherwise acts as a middleman between the payor and the payee) shall comply with the requirements of subsections (a) and (c), and "(B) no other person shall be required to comply with the requirements of subsections (a) and (c) with respect to any interest on such obligation for which reporting is required pursuant to subparagraph (A). "(5) INTEREST ON CERTAIN OBLIGATIONS MAY BE TREATED ON A TRANSACTIONAL BASIS.—

"(A) IN GENERAL.—To the extent and in the m a n n e r provided in regulations, this section shall apply with respect to— "(i) any person described in paragraph (4)(A), and "(ii) in the case of any United States savings bonds, any Federal agency making payments thereon, on any transactional basis r a the r than on a n annual aggregation basis. "(B) SEPARATE RETURNS AND STATEMENTS.—If

subpara-

g r a p h (A) applies to interest on any obligation, the r e t u r n under subsection (a) and the statement furnished under subsection (c) with respect to such transaction may be made separately, b u t any such statement shall be furnished to the payee a t such time as the Secretary may prescribe by regulations b u t not later than January 31 of the next calendar year. "(C) STATEMENT TO PAYEE REQUIRED IN CASE OF TRANSACTIONS INVOLVING $10 OR MORE.—In the case of any t r a n s a c -

tion to which this paragraph applies which involves the payment of $10 or more of interest, a statement of the transaction may be provided to the payee of such interest in lieu of the statement required under subsection (c). Such

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 595

statement shall be provided during January of the year following the year in which such payment is made. "(6) TREATMENT OF ORIGINAL ISSUE DISCOUNT.—

"(A) IN GENERAL.—Original issue discount on any obligation shall be reported— "(i) as if paid at the time it is includible in gross income under section 1232A (except that for such purpose the amount reportable with respect to any subsequent holder shall be determined as if he were the original holder), and "(ii) if section 1232A does not apply to the obligation, at maturity (or, if earlier, on redemption). In the case of any obligation not in registered form issued before January 1, 1983, clause (ii) and not clause (i) shall apply. "(B) ORIGINAL ISSUE DISCOUNT.—For purposes of this paragraph, the term 'original issue discount' has the meaning given to such term by section 1232(b)(1).".

Ante, p. 496.

(b) TECHNICAL AMENDMENTS.—

(1) Subsection (a) of section 6041 (relating to information at source) is amended— (A) by striking out "6049(a)(1)" and inserting in lieu thereof "6049(a)", and (B) by striking out "6045, 6049(a)(2), or 6049(a)(3)" and inserting in lieu thereof "or 6045". (2) Subsection (b) of section 6652 (relating to failure to file certain information returns) is amended by adding "or" at the end of paragraph (1) and by striking out paragraphs (3) and (4). (3) Paragraph (1) of section 6678 is amended by striking out "6049(a)(1)" and inserting in lieu thereof "6049(a)". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to amounts paid (or treated as paid) after December 31, 1982.

26 USC 6041.

95 Stat. 343. 26 USC 6678. 26 USC 6049 "°*®-

SP:C. 310. OBLIGATIONS REQUIRED TO BE REGISTERED.

(a) UNITED STATES OBLIGATIONS.—The Second Liberty Bond Act is amended by adding at the end thereof the following new section: "SEC. 28. (a) Every registration-required obligation of the United 31 USC 757c-5. States (or of any agency or instrumentality thereof) shall be in registered form. "(b) For purposes of this section— "(1) Except as provided in paragraph (2), the term 'registration-required obligation' means any obligation other than an obligation which— "(A) is not of a type offered to the public, or "(B) has a maturity (at issue) of not more than 1 year. "(2) The term 'registration-required obligation' shall not include any obligation if— "(A) there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and "(B) in the case of an obligation not in registered form— "(i) interest on such obligation is payable only outside the United States and its possessions, and "(ii) on the face of such obligation there is a statement that any United States person who holds such

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 96 STAT. 596

PUBLIC LAW 97-248—SEPT. 3, 1982 obligation will be subject to limitations under the United States income tax laws. "(c)(1) For purposes of subsection (a), a book entry obligation shall be treated as in registered form if the right to principal of, and stated interest on, such obligation may be transferred only through a book entry consistent with regulations prescribed by the Secretary of the Treasury. "(2) The Secretary of the Treasury shall prescribe such regulations as may be necessary to carry out the purpose of subsection (a) where there is a nominee or chain of nominees.". (b) OTHER OBLIGATIONS.— (1) OBLIGATIONS MUST BE IN REGISTERED FORM TO BE TAX-

95 Stat. 350.

EXEMPT.—Section 103 (relating to interest on certain governmental obligations) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: "(j) OBLIGATIONS MUST B E IN REGISTERED FORM TO B E TAXEXEMPT.—

"(1) IN GENERAL.—Nothing in subsection (a) or in any other provision of law shall be construed to provide an exemption from Federal income tax for interest on any registrationrequired obligation unless the obligation is in registered form. "(2) REGISTRATION-REQUIRED OBLIGATION.—The term 'registration-required obligation* means any obligation other than an obligation which— "(A) is not of a type offered to the public, "(B) has a maturity (at issue) of not more than 1 year, or "(C) is described in section 163(f)(2)(B). "(3) SPECIAL RULES.— "(A) BOOK ENTRIES PERMITTED.—For

purposes of paragraph (1), a book entry obligation shall be treated as in registered form if the right to the principal of, and stated interest on, such obligation may be transferred only through a book entry consistent with regulations prescribed by the Secretary. "(B) NOMINEES.—The Secretary shall prescribe such regulations as may be necessary to carry out the purpose of paragraph (1) where there is a nominee or chain of nominees."

(2) DENIAL OF DEDUCTION FOR INTEREST IF OBLIGATION NOT IN

Ante, p. 498.

REGISTERED FORM.—Section 163 (relating to deduction for interest) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: "(f) DENIAL OF DEDUCTION FOR INTEREST ON CERTAIN OBLIGATIONS NOT IN REGISTERED FORM.—

"(1) IN GENERAL.—Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for interest on any registration-required obligation unless such obligation is in registered form. "(2)

REGISTRATION-REQUIRED OBLIGATION.—For purposes

of

this section— "(A) IN GENERAL.—The term 'registration-required obligation' means any obligation (including any obligation issued by a governmental entity) other than an obligation which— "(i) is issued by a natural person, "(ii) is not of a type offered to the public,

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96 STAT. 597

"(iii) has a m a t u r i t y (at issue) of not more than 1 year, or "(iv) is described in subparagraph (B). "(B) CERTAIN OBLIGATIONS NOT INCLUDED.—An obligation

is described in this subparagraph if— "(i) the r e a r e a r r a n g e m e n t s reasonably designed to e n s u r e that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and "(ii) in the case of an obligation not in registered form— "(I) interest on such obligation is payable only outside the United States and its possessions, and "(II) on the face of such obligation the r e is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws. "(C) AUTHORITY TO INCLUDE OTHER OBLIGATIONS.—Clauses

(ii) and (iii) of subparagraph (A), and subparagraph (B), shall not apply to any obligation if— "(i) such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, and "(ii) such obligation is issued after the date on which the regulations referred to in clause (i) t a k e effect. "(3) BOOK ENTRIES PERMITTED, ETC.—For purposes of this sub-

section, rules similar to the rules of section apply."

103(j)(3) shall

95 Stat. 350.

(3) D E N I A L OF EARNINGS AND PROFITS ADJUSTMENT FOR INTEREST O N REGISTRATION-REQUIRED OBLIGATIONS NOT IN REGISTERED

FORM.—Section 312 (relating to e a r n i n g s and profits) is amended by adding at the end thereof the following new subsection: "(m) N o ADJUSTMENT FOR INTEREST P A I D ON CERTAIN REGISTRATION-REQUIRED OBLIGATIONS N O T IN REGISTERED FOR M. — The e a r n -

ings and profits of any corporation shall not be decreased by any interest with respect to which a deduction is not or would not be allowable by reason of section 163(f), unless at the time of issuance the issuer is a foreign corporation that is not a controlled foreign corporation (within the m e a n i n g of section 957), a foreign investment company (within the m e a n i n g of section 1246(b)), or a foreign personal holding company (within the m e a n i n g of section 552) and the issuance did not have as a purpose the avoidance of section 163(f) of this subsection". (4) EXCISE TAX ON ISSUERS OF REGISTRATION-REQUIRED OBLIGATIONS WHICH ARE NOT IN REGISTERED FORM.—

(A) IN GENERAL.—Subtitle D (relating to miscellaneous excise taxes) is amended by adding after chapter 38 the following new chapter:

"CHAPTER 39—REGISTRATION-REQUIRED OBLIGATIONS "Sec. 4701. T a x on issuer of refjistration-required obligation not in registered form.

26 USC 312.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/640

 96 STAT. 598 26 USC 4701.

PUBLIC LAW 97-248—SEPT. 3, 1982 "SEC. 4701. TAX ON ISSUER OF REGISTRATION-REQUIRED OBLIGATION NOT IN REGISTERED FORM.

"(a) IMPOSITION OF TAX.—In the case of any person who issues a registration-required obligation, which is not in registered form, there is hereby imposed on such person on the issuance of such obligation a tax in an amount equal to the product of^ "(1) 1 percent of the principal amount of such obligation, multiplied by "(2) the number of calendar years (or portions thereof) during the period beginning on the date of issuance of such obligation and ending on the date of maturity. "(b) DEFINITIONS.—For purposes of this section— "(1) REGISTRATION-REQUIRED OBLIGATION.—The term 'registration-required obligation' has the same meaning as when used in section 163(f), except that such term shall not include any obligation required to be registered under section 103(j). "(2) REGISTERED FORM.—The term 'registered form' has the same meaning as when used in section 163(f)." (B) CONFORMING AMENDMENT.—The table of chapters for subtitle D is amended by inserting after chapter 38 the following: "CHAPTER 39. Registration-required obligations." (5) DENIAL OF DEDUCTION FOR LOSSES ON CERTAIN OBLIGATIONS

Ante, p. 422.

NOT IN REGISTERED FORM.—Section 165 (as amended by this Act) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: "(j) DENIAL OF DEDUCTION FOR LOSSES ON CERTAIN OBLIGATIONS NOT IN REGISTERED FORM.—

"(1) IN GENERAL.—Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for any loss sustained on any registration-required obligation unless such obligation is in registered form (or the issuance of such obligation was subject to tax under section 4701). "(2) DEFINITIONS.—For purposes of this subsection— "(A) REGISTRATION-REQUIRED OBLIGATION.—The term 'registration-required obligation' has the meaning given to such term by section 163(0(2) except that clause (iv) of subparagraph (A), and subparagraph (B), of such section shall not apply. "(B) REGISTERED FORM.—The term 'registered form' has the same meaning as when used in section 163(0. "(3) EXCEPTIONS.—The Secretary may, by regulations, provide that this subsection and subsection (d) of section 1232 shall not apply with respect to obligations held by any person if— "(A) such person holds such obligations in connection with a trade or business outside the United States, "(B) such person holds such obligations as a broker dealer (registered under Federal or State law) for sale to customers in the ordinary course of his trade or business, "(C) such person complies with reporting requirements with respect to ownership, transfers, and payments as the Secretary may require, or "(D) such person promptly surrenders the obligation to the issuer for the issuance of a new obligation in registered form.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/641

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 599

but only if such obligations are held under arrangements provided in regulations or otherwise which are designed to assure that such obligations are not delivered to any United States person other than a person described in subparagraph (A), (B), or (C)." (6) DENIAL OF CAPITAL GAIN TREATMENT FOR GAINS ON CERTAIN

OBLIGATIONS NOT IN REGISTERED FORM.—Section 1232 (relating to 26 USC 1232. bonds and other evidences of indebtedness) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: "(d) DENIAL OF CAPITAL GAIN TREATMENT FOR GAINS ON CERTAIN OBLIGATIONS NOT IN REGISTERED FORM.—

"(1) IN GENERAL.—If any registration-required obligation is not in registered form, any gain on the sale or other disposition of such obligation shall be treated as ordinary income (unless the issuance of such obligation was subject to tax under section 4701). "(2) DEFINITIONS.—For purposes of this subsection— "(A) REGISTRATION-REQUIRED OBLIGATION.—The term 'registration-required obligation' has the meaning given to such term by section 163(f)(2) except that clause (iv) of subparagraph (A), and subparagraph (B), of such section shall not apply. "(B) REGISTERED FORM.—The term 'registered form' has the same meaning as when used in section 163(0." (c) TECHNICAL AMENDMENTS.—

(1) Subparagraph (A) of section 103(b)(4) (relating to certain 26 USC 103. exempt activities) is amended by striking out "if each obligation issued pursuant to the issue is in registered form and". (2)(A) Paragraph (1) of section 103(h) (relating to certain obligations must be in registered form and not guaranteed or subsidized under an energy program) is amended by striking out subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively. (B) The subsection heading for subsection (h) of section 103 is amended by striking out "MUST B E IN REGISTERED FORM AND NOT" and inserting in lieu thereof "MUST NOT B E ".

(3)(A) Subsection 0') of section 103A (relating to other require- 26 USC 103A. ments) is amended by striking out paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (B) Subparagraph (B) of section 103A(c)(2) (defining qualified mortgage issue) is amended by striking out "and (0 and paragraphs (2) and (3) of subsection (j)" and inserting in lieu thereof "(f), and (J)". (C) Subparagraph (C) of section 103A(c)(2) is amended by striking out ", and paragraph (1) of subsection (j)". (D) Subparagraph (C) of section 103A(c)(3) (defining qualified veterans' mortgage bond) is amended by striking out "subsection (j)(2)" and inserting in lieu thereof "subsection (j)(l)". (4) Subparagraph (A) of section 103A(c)(3) (defining qualified veterans' mortgage bond) is amended by striking out "in registered form". (d) EFFECTIVE DATES.— 26 USC 103 note. (1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to obligations issued after December 31, 1982.

97-200 O—84—pt. 1

21: QL3

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