text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/808

 98 STAT. 760

Ante, p. 726.

PUBLIC LAW 98-369—JULY 18, 1984 any contract to which an election under section 818(c) of such Code (as in effect on the day before the date of the enactment of this Act) applied shall be treated as a change in the basis for determining the amount of any reserve. (C) 10-YEAR SPREAD INAPPLICABLE WHERE NO 10-YEAR SPREAD UNDER PRIOR LAW.—In the case of any item to which section 807(f) of such Code applies by reason of subparagraph (A) or (B), such item shall be taken into account for the first taxable year beginning after December 31, 1983 (in lieu of over the 10-year period otherwise provided in such section) unless the item was required to have been taken into account over a period of 10 taxable years under section 810(d) of such Code (as in effect on the day before the date of the enactment of this Act). (D) DISALLOWANCE OF SPECIAL LIFE INSURANCE COMPANY

DEDUCTION AND SMALL LIFE INSURANCE COMPANY DEDUCTION.—Any amount included in income under section 807(f) of such Code by reason of subparagraph (A) or (B) (and any income attributable to expenses transferred in connection with the transfer of reserves described in subparagraph (A)) shall not be taken into account for purposes of determining the amount of special life insurance company deduction and the small life insurance company deduction. (E)

DISALLOWANCE

OF

DEDUCTIONS

UNDER

SECTION

809 (d).—No deduction shall be allowed under paragraph (5) or (6) of section 809(d) of such Code (as in effect before the amendments made by this subtitle) with respect to any amount described in either such paragraph which is transferred in connection with the transfer of reserves described in subparagraph (A). (4) ELECTIONS UNDER SECTION 818(C) 1983, NOT TO TAKE EFFECT.—

AFTER SEPTEMBER 27,

(A) IN GENERAL.—Except as provided in subparagraph (B), any election after September 27, 1983, under section 818(c) of the Internal Revenue Code of 1954 (EIS in effect on the day before the date of the enactment of this Act) shall not take effect. " 5 '^

Ante, p. 752.

(B) EXCEPTION FOR CERTAIN CONTRACTS ISSUED UNDER PLAN

OF INSURANCE FIRST FILED AFTER MARCH 1, 1982, AND BEFORE SEPTEMBER 28, 1983.—Subparagraph (A) shall not apply to any election under such section 818(c) if more than 95 percent of the reserves computed in accordance with such election are attributable to risks under life insurance contracts issued by the taxpayer under a plan of insurance first filed after March 1, 1982, and before September 28, 1983. (5) RECAPTURE OF REINSURANCE AFTER DECEMBER 31, 1983.—If

(A) insurance or annuity contracts in force on December 31, 1983, are subject to a conventional coinsurance agreement entered into after December 31, 1981, and before January 1, 1984, and (B) such contracts are recaptured by the reinsured in any taxable year beginning after December 31, 1983, then— (i) if the amount of the reserves with respect to the recaptured contracts, computed at the date of recapture, that the reinsurer would have taken into account under section 810(c) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act) exceeds the amount of the reserves with respect to the

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/809

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 761

recaptured contracts, computed at the date of recapture, taken into account by the reinsurer under section 807(c) of the Internal Revenue Code of 1954 (as amended by this Ante, p. 726. subtitle), such excess (but not greater than the amount of such excess if computed on January 1, 1984) shall be taken into account by the reinsurer under the method described in section 807(f)(l)(B)(ii) of the Internal Revenue Code of 1954 (as amended by this subtitle) commencing with the taxable year of recapture, and (ii) the amount, if any, taken into account by the reinsurer under clause (i) for purposes of part I of subchapter L of chapter 1 of the Internal Revenue Code of 1954 shall be Ante, p. 720. taken into account by the reinsured under the method described in section 807(f)(l)(B)(i) of the Internal Revenue Code of 1954 (as amended by this subtitle) commencing with the taxable year of recapture. The excess described in clause (i) shall be reduced by any portion of such excess to which section 807(f) of the Internal Revenue Code of 1954 applies by reason of paragraph (3) of this subsection. For purposes of this paragraph, the term "reinsurer" refers to the taxpayer that held reserves with respect to the recaptured contracts as of the end of the taxable year preceding the first taxable year beginning after December 31, 1983, and the term "reinsured" refers to the taxpayer to which such reserves are ultimately transferred upon termination. (c) ELECTION NOT TO HAVE RESERVES RECOMPUTED.—

(1) IN GENERAL.—If a qualified life insurance company makes an election under this paragraph— (A) subsection (a) shall not apply to such company, and (B) as of the beginning of the first taxable year beginning after December 31, 1983, and thereafter, the reserve for any contract issued before the first day of such taxable year by such company shall be the statutory reserve for such contract (within the meaning of section 809(b)(4)(B)(i) of the Internal Revenue Code of 1954). Ante, p 733. (2) ELECTION WITH RESPECT TO CONTRACTS ISSUED AFTER 1983 AND BEFORE 1989.— (A) IN GENERAL.—If—

(i) a qualified life insurance company makes an election under paragraph (1), and (ii) the tentative LICTI (within the meaning of section 806(c) of such Code) of such company for its first Ante, p. 724. taxable year beginning after December 31, 1983, does not exceed $3,000,000, such company may elect under this paragraph to have the reserve for any contract issued on or after the first day of such first taxable year and before January 1, 1989, be equal to the statutory reserve for such contract, adjusted as provided in subparagraph (B). (B) ADJUSTMENT TO RESERVES.—If this paragraph applies to any contract, the statutory reserves for such contract shall be adjusted as provided under section 805(c)(1) of such Code (as in effect for taxable years beginning in 1982 and 1983), except that section 805(c)(l)(B)(ii) of such Code (as so in effect) shall be applied by substituting— (i) the prevailing State assumed interest rate (within the meaning of section 807(c)(4) of such Code), for Ante, p. 726.

�

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/810

 98 STAT. 762

PUBLIC LAW 98-369—JULY 18, 1984 (ii) the adjusted reserves rate. (3) QuAUFiED LIFE INSURANCE COMPANY.—For purposes of this subsection, the term "qualified life insurance company" means any life insurance company which, as of December 31, 1983, had assets of less than $100,000,000 (determined in the same manner as under section 806(b)(3) of such Code). (4) SPECIAL RULES FOR CONTROLLED GROUPS.—For purposes of

Ante, p. 724.

applying the dollar limitations of paragraphs (2) and (3), rules similar to the rules of section 806(d) of such Code shall apply. (5) ELECTIONS.—Any election under paragraph (1) or (2)— (A) shall be made at such time and in such manner as the Secretary of the Treasury may prescribe, and (B) once made, shall be irrevocable. SEC. 217. OTHER SPECIAL RULES.

26 USC 814 note.

Ante, p. 744.

(a) N E W SECTION 8 1 4 TREATED AS CONTINUATION OF SECTION

819A.—For purposes of section 814 of the Internal Revenue Code of 1954 (relating to contiguous country branches of domestic life insurance companies)— (1) any election under section 819A of such Code (as in effect on the day before the date of the enactment of this Act) shall be treated as an election under such section 814, and (2) any reference to a provision of such section 814 shall be treated as including a reference to the corresponding provision of such section 819A.

26 USC 453B

(b) TREATMENT OF ELECTIONS U N D E R SECTION 453B(e)(2).—If a n

note. Ante, p. 755.

election is made under section 453B(e)(2) before January 1, 1984, ^i^h respect to any installment obligation, any income from such obligation shall be treated as attributable to a noninsurance business (as defined in section 806(c)(3) of the Internal Revenue Code of 1954).

Ante, p. 724. 26 USC 806 note.

(c) DETERMINATION OF TENTATIVE LICTI W H E R E CORPORATION MADE CERTAIN ACQUISITIONS IN 1980, 1981, 1982, AND 1983.—If—

(1) a corporation domiciled or having its principal place of business in Alabama, Arkansas, Oklahoma, or Texas acquired the assets of 1 or more insurance companies after 1979 and before April 1, 1983, and (2) the bases of such assets in the hands of the corporation were determined under section 3340t))(2) of the Internal Revenue Code of 1954 or such corporation made an election under section 338 of such Code with respect to such assets, then the tentative LICTI of the corporation holding such assets for taxable years beginning after December 31, 1983, shall, for purposes of determining the amount of the special deductions under section 806 of such Code, be increased by the deduction allowable under chapter 1 of such Code for the amortization of the cost of insurance contracts acquired in such asset acquisition (and any portion of any operations loss deduction attributable to such amortization). 26 USC 845 note.

Ante, p. 757.

26 USC 801 note.

(d) EFFECTIVE D A T E FOR N E W SECTION 8 4 5. —

(1) Subsection (a) of section 845 of the Internal Revenue Code of 1954 (as added by this title) shall apply with respect to any risk reinsured on or after September 27, 1983. (2) Subsection (b) of section 845 of such Code (as so added) shall apply with respect to risks reinsured after December 31, 1984. (e) TREATMENT OF CERTAIN COMPANIES OPERATING BOTH AS S TO C K

AND MUTUAL COMPANY.—If, during the 10-year period ending on

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/811

 PUBLIC LAW 98-369—JULY 18, 1984 December 31, 1983, a company has, as authorized by the law of the State in which the company is domiciled, been operating as a mutual life insurance company with shareholders, such company shall be treated as a stock life insurance company. (f) TREATMENT OF CERTAIN ASSESSMENT LIFE INSURANCE COMPANIES.— (1) MoRTAUTY AND MORBIDITY TABLES.—In the case of a contract issued by an assessment life insurance company, the mortality and morbidity tables used in computing statutory reserves for such contract shall be used for purposes of paragraph (2)(C) of section 807(d) of the Internal Revenue Code of 1954 (as amended by this subtitle) if such tables were— (A) in use since 1965, and (B) developed on the basis of the experience of assessment life insurance companies in the State in which such assessment life insurance company is domiciled.

98 STAT. 763

26 USC 807 note.

Ante, p. 726.

(2) TREATMENT OF CERTAIN MUTUAL ASSESSMENT LIFE INSURANCE COMPANIES.—In the case of any contract issued by a

mutual assessment life insurance company which— (A) has been in existence since 1965, and (B) operates under chapter 13 or 14 of the Texas Insurance Code, for purposes of part I of subchapter L of chapter 1 of the Internal Revenue Code of 1954, the amount of the life insurance reserves for such contract shall be equal to the amount taken into account with respect to such contract in determining statutory reserves. (3) STATUTORY RESERVES.—For purposes of this subsection, the term "statutory reserves" has the meaning given to such term by section 809(b)(4)(B) of such Code. (g)

TREATMENT OF REINSURANCE AGREEMENTS REQUIRED BY

Ante, p. 720.

Ante, p. 733. 26 USC 801 note.

NAIC.—Effective for taxable years beginning after December 31, 1981, and before January 1, 1984, subsections (c)(l)(F) and (d)(12) of section 809 of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act) shall not apply to dividends to policyholders reimbursed to the taxpayer by a reinsurer in respect of accident and health policies reinsured under a reinsurance agreement entered into before June 30, 1955, pursuant to the direction of the National Association of Insurance Commissioners and approved by the State insurance commissioner of the taxpayer's State of domicile. For purposes of subchapter L of chapter 1 of such Code (as in effect on the day before the date of the enactment of this Act) any such dividends shall be treated as dividends of the reinsurer and not the taxpayer. (h) DETERMINATION OF ASSETS OF CONTROLLED GROUP FOR PUR- 26 USC 806 note. POSES OF SMALL LIFE INSURANCE COMPANY DEDUCTION FOR 1984.— (1) IN GENERAL.—For purposes of applying paragraph (2) of section 806(d) of the Internal Revenue Code of 1954 (relating to Ante, p. 724. nonlife insurance members included for asset test) for the first taxable year beginning after December 31, 1983, the members of the controlled group referred to in such paragraph shall be treated as including only those members of such group which are described in paragraph (2) of this subsection if— (A) an election under section 1504(c)(2) of such Code is not in effect for the controlled group for such taxable year, (B) during such taxable year, the controlled group does not include a member which is taxable under part I of

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/812

 98 STAT. 764 Ante, p. 720.

.;i

PUBLIC LAW 98-369—JULY 18, 1984 subchapter L of chapter 1 of such Code and which became a member of such group after September 27, 1983, and (C) the sum of the contributions to capital received by members of the controlled group which are taxable under such part I during such taxable year from the members of the controlled group which are not taxable under such part does not exceed the aggregate dividends paid during such taxable year by the members of such group which are taxable under such part L (2) MEMBERS OF GROUP TAKEN INTO ACCOUNT.—For purposes of

paragraph (1), the members of the controlled group which are described in this paragraph are— (A) any financial institution to which section 585 or 593 of such Code applies, (B) any lending or finance business (as defined by section 542(d)), (C) any insurance company subject to tax imposed by subchapter L of chapter 1 of such Code, and (D) any securities broker. 26 USC 816 note.

Ante, p. 748.

(i) SPECIAL ELECTION To TREAT INDIVIDUAL NONCANCELLABLE ACCIDENT AND H E A L T H CONTRACTS AS CANCELLABLE.—

(1) IN GENERAL.—A mutual life insurance company may elect to treat all individual noncancellable (or guaranteed renewable) accident and health insurance contracts as though they were cancellable for purposes of section 816 of subchapter L of chapter 1 of the Internal Revenue Code of 1954. (2)

EFFECT

OF ELECTION

ON SUBSIDIARIES OF ELECTING

PARENT.— (A) TREATED AS MUTUAL U F E INSURANCE COMPANY.—Any

Ante, p. 720.

stock life insurance company which is a member of an affiliated group which has a common parent which made an election under paragraph (1), for purposes of part I of subchapter L of the Internal Revenue Code of 1954, such stock life insurance company shall be treated as though it were a mutual life insurance company. (B) INCOME OF ELECTING PARENT TAKEN INTO ACCOUNT IN DETERMINING SMALL LIFE INSURANCE COMPANY DEDUCTION OF

ANY SUBSIDIARY.—For purposes of determining the amount of the small life insurance company deduction of any controlled group which includes a mutual company which made an election under paragraph (1), the taxable income of such electing company shall be taken into account under Ante, p. 724. section 806(b)(2) of the Internal Revenue Code of 1954 (relating to phase-out of small life insurance company deduction). (3) ELECTION.—An election under paragraph (1) shall apply to the company's first taxable year beginning after December 31, 1983, and all taxable years thereafter, (4) TIME AND MANNER.—An election under paragraph (1) shall be made— (A) on the return of the taxpayer for its first taxable year beginning after December 31, 1983, and (B) in such manner as the Secretary of the Treeisury or his delegate may prescribe. 26 USC 809 note. (j) REDUCTION IN EQUITY BASE FOR MuTUAL SUCCESSOR OF FRATERNAL BENEFIT SOCIETY.—In the case of any mutual life insurance company which— (1) is the successor to a fraternal benefit society, and

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/813

 PUBLIC LAW 98-369—JULY 18, 1984 (2) which assumed the surplus of such fraternal benefit society in 1950 or in March of 1961, for purposes of section 809 of the Internal Revenue Code of 1954 (as amended by this subtitle), the equity base of such mutual life insurance company shall be reduced by the amount of the surplus so assumed plus earnings thereon, (i) for taxable years before 1984, at a 7 percent interest rate, and (ii) for taxable years 1984 and following, at the average mutual earnings rate for such year. (k) SPECIAL RULE FOR CERTAIN DEBT-FINANCED ACQUISITION OF

98 STAT. 765

Ante, p. 733.

26 USC 806 note.

STOCK.—If—

(1) a life insurance company owns the stock of another corporation through a partnership of which it is a partner, (2) the stock of the corporation was acquired on January 14, 1981, and (3) such stock was acquired by debt financing, then, for purposes of determining the special deductions under section 806 of the Internal Revenue Code of 1954 (as amended by Ante, p. 724. this subtitle), the amount of tentative LICTI of such life insurance company shall be computed without taking into account any income, gain, loss, or deduction attributable to the ownership of such stock. (1) TREATMENT OF LOSSES FROM CERTAIN GUARANTEED INTEREST 26 USC 806 note. CONTRACTS.—

(1) IN GENERAL.—For purposes of determining the amount of the special deductions under section 806 of the Internal Revenue Code of 1954 (as amended by this subtitle), for any taxable year beginning before January 1, 1988, the amount of tentative LICTI of any qualified life insurance company shall be computed without taking into account any income, gain, loss, or deduction attributable to a qualified GIC. (2) QuAUFiED LIFE INSURANCE COMPANY.—For purposes of this subsection, the term "qualified life insurance company" means any life insurance company if— (A) the accrual of discount less amortization of premium for bonds and short-term investments (as shown in the first footnote to Exhibit 3 of its 1983 annual statement for life insurance companies approved by the National Association of Insurance Commissioners (but excluding separate accounts) filed in its State of domicile) exceeds $72,000,000 but does not exceed $73,000,000, and (B) such life insurance company makes an election under this subsection on its return for its first taxable year beginning after December 31, 1983. (3) QuAUFiED GIC.—The term "qualified GIC" means any group contract— (A) which is issued before January 1, 1984, (B) which specifies the contract maturity or renewal date, (C) under which funds deposited by the contract holder plus interest guaranteed at the inception of the contract for the term of the contract and net of any specified expenses are paid as directed by the contract holder, and (D) which is a pension plan contract (as defined in section 818(a) of the Internal Revenue Code of 1954). Ante, p. 752. (4) SCOPE OF ELECTION.—An election under this subsection shall apply to all qualified GIC's of a qualified life insurance company. Any such election, once made, shall be irrevocable. (5) INCOME ON UNDERLYING ASSETS TAKEN INTO ACCOUNT.—In

determining the amount of any income attributable to a quali-

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/814

 98 STAT. 766

Ante, p. 724.

PUBLIC LAW 98-369—JULY 18, 1984 fled GIC, income on any asset attributable to such contract (as determined in the manner provided by the Secretary of the Treasury or his delegate) shall be taken into account. (6) LIMITATION ON TAX BENEFIT,—The amount of any reduction in tax for any taxable year by reason of this subsection for any qualified life insurance company (or controlled group within the meaning of section 806(d)(3) of the Internal Revenue Code of 1954) shall not exceed the applicable amount set forth in the following table:

In the case of taxable The reduction may years beginning in: not exceed: 1984 $4,500,000 1985 $4,500,000 1986 $3,000,000 1987 $2,000,000 26 USC 806 note. (m) SPECIAL RULE FOR CERTAIN INTERESTS IN OiL AND G A S PROPERTIES.—

(1) IN GENERAL.—For purposes of section 806 of the Internal Revenue Code of 1954, the ownership by a qualified life insurance company of any undivided interest in operating mineral interests with respect to any oil or gas properties held on December 31, 1983, shall be treated as an insurance business. (2) QUALIFIED LIFE INSURANCE COMPANY.—For purpOSeS of

paragraph (1), the term "qualified life insurance company" means a mutual life insurance company which— (A) was originally incorporated in March of 1857, and (B) has a cost to such company (as of December 31, 1983) in the operating mineral interests described in paragraph (1) in excess of $250,000,000. 26 USC 807 note.

Ante, p. 726.

(n) SPECIAL RULE FOR COMPANIES USING N E T LEVEL RESERVE METHOD FOR NONCANCELLABLE ACCIDENT AND HEALTH INSURANCE

CONTRACTS.—A company shall be treated as meeting the requirement of section 807(d)(3)(A)(iii) of the Internal Revenue Code of 1954, as amended by this Act, with respect to any noncancellable accident and health insurance contract for any taxable year if such company— (1) uses the net level reserve method to compute its tax reserves under section 807 of such Code on such contracts for such taxable year, (2) was using the net level reserve method to compute its statutory reserves on such contracts as of December 31, 1982, and (3) has continuously used such method for computing such reserves on such contracts after December 31, 1982, and through such taxable year.

26 USC 6655

SEC. 218. UNDERPAYMENTS OF ESTIMATED TAX FOR 1984.

"° •

No addition to the tax shall be made under section 6655 of the Internal Revenue Code of 1954 (relating to failure by corporation to pay estimated tax) with respect to any underpayment of an installment required to be paid before the date of the enactment of this Act to the extent— (1) such underpayment was created or increased by any provision of this subtitle, and (2) such underpayment is paid in full on or before the last date prescribed for payment of the first installment of estimated tax required to be paid after the date of the enactment of this Act.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/815

 PUBLIC LAW 98-369—JULY 18, 1984 SEC. 219. CLARIFICATION OF AUTHORITY TO REQUIRE CERTAIN INFORMATION.

Nothing in any provision of law shall be construed to prevent the Secretary of the Treasury or his delegate from requiring (from time to time) life insurance companies to provide such data with respect to taxable years beginning before January 1, 1984, as may be necessary to carry out the provisions of section 809 of such Code (as added by this title).

98 STAT. 767 26 USC 809 note

Ante, p. 733.

Subtitle B—Taxation of Life Insurance Products SEC. 221. DEFINITION OF LIFE INSURANCE CONTRACT.

(a) GENERAL RULE.—Chapter 79 (relating to definitions) is amended by adding at the end thereof the following new section: "SEC. 7702. LIFE INSURANCE CONTRACT DEFINED.

26 USC 7702.

"(a) GENERAL RULE.—For purposes of this title, the term 'life insurance contract' means any contract which is a life insurance contract under the applicable law, but only if such contract— "(1) meets the cash value accumulation test of subsection (b), or "(2)(A) meets the guideline premium requirements of subsection (c), and "(B) falls within the cash value corridor of subsection (d). "(b) CASH VALUE ACCUMULATION TEST FOR SUBSECTION (a)(1).—

"(1) IN GENERAL.—A contract meets the cash value accumulation test of this subsection if, by the terms of the contract, the cash surrender value of such contract may not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract. "(2) RULES FOR APPLYING PARAGRAPH

(D.—Determinations

under paragraph (1) shall be made— "(A) on the basis of interest at the greater of an annual effective rate of 4 percent or the rate or rates guaranteed on issuance of the contract, "(B) on the basis of the rules of subparagraph (B)(i) (and, in the case of qualified additional benefits, subparagraph (B)(ii)) of subsection (c)(3), and "(C) by taking into account under subparagraphs (A) and (C) of subsection (e)(1) only current and future death benefits and qualified additional benefits. "(c) GUIDELINE PREMIUM REQUIREMENTS.—For purposes of this section— "(1) IN GENERAL.—A contract meets the guideline premium requirements of this subsection if the sum of the premiums paid under such contract does not at any time exceed the guideline premium limitation as of such time. "(2) GUIDELINE PREMIUM LIMITATION.—The term 'guideline premium limitation' means, as of any date, the greater of— "(A) the guideline single premium, or "(B) the sum of the guideline level premiums to such date. "(3) GUIDEUNE SINGLE PREMIUM.—

�


text:
Page:The Yellow Book - 06.djvu/271

By Rose Haig Thomas

this cold grey world for me

With its dull monotony

Of sombre land and sea.

No! a mad career

In another sphere,

Rather than linger here.

Then heigh for rosy Mars!

The king of all the stars!

Where prisms play

Pranks with the day—

There would I stay,

Where light is dark, and darkness bright,

And wisdom folly, weakness might.

Where right is wrong, and wrong made right,

Where night is day, and day is night,

And the night glows rich with a warm red light.

So

title: Page:The Yellow Book - 06.djvu/271


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/816

 98 STAT. 768

PUBLIC LAW 98-369—JULY 18, 1984

^

"(A) IN GENERAL.—The term 'guideline single premium' means the premium at issue with respect to future benefits under the contract. "(B) BASIS ON WHICH DETERMINATION IS MADE.—The determination under subparagraph (A) shall be based on— "(i) the mortality charges specified in the contract (or, if none is specified, the mortality charges used in determining the statutory reserves for such contract), "(ii) any charges (not taken into account under clause (i)) specified in the contract (the amount of any charge not so specified shall be treated as zero), and "(iii) interest at the greater of an annual effective rate of 6 percent or the rate or rates guaranteed on issuance of the contract. "(C) WHEN DETERMINATION MADE.—Except as provided in

subsection (f)(7), the determination under subparagraph (A) shall be made as of the time the contract is issued. "(4) GUIDELINE LEVEL PREMIUM.—The term 'guideline level premium' means the level annual amount, payable over a period not ending before the insured attains age 95, computed on the same basis as the guideline single premium, except that paragraph (3)(B)(iii) shall be applied by substituting '4 percent' for '6 percent'. "(d)

CASH

VALUE

CORRIDOR

FOR PURPOSES

OF

SUBSECTION

(a)(2)(B).—For purposes of this section— "(1) IN GENERAL.—A contract falls within the cash value corridor of this subsection if the death benefit under the contract at any time is not less than the applicable percentage of the cash surrender value. "(2) APPLICABLE PERCENTAGE.— "In the case of an insured with an The applicable percentage shall deattained age as of the beginning of crease by a ratable portion for the contract year of: each full year: But not To: More than: more than: From: 250 0 40 250 250 40 45 215 215 45 50 185 50 55 185 150 150 55 60 130 130 60 65 120 120 65 70 115 115 70 75 105 105 75 90 105 100. 105 90 95 "(e) COMPUTATIONAL RULES.—

"(1) IN GENERAL.—For purposes of this section— "(A) the death benefit (and any qualified additional benefit) shall be deemed not to increase, "(B) the maturity date, including the date on which any benefit described in subparagraph (C) is payable, shall be no earlier than the day on which the insured attains age 95, and no later than the day on which the insured attains age 100, and

 * TiKi.'yi'. sjiinm z/-

�


text:
Page:The Yellow Book - 06.djvu/272

 So heigh for rosy Mars

The king of all the stars!

Where purple fish leap in a scarlet sea,

In sportive play;

Where deep waves roll, wine-red as Burgundy.

Throughout the day

Across the blazing heavens sails an azure sun;

How his cerulean shades

Melt into mauve among the rosy blades!

And blood-red trees their golden shadows write

Over the violet glades.

There winged beings green as malachite

Flit in and out the cooling turquoise light

At the high noon.

And when the sun sets deeply darkly blue,

Bathing the bloody blades in opal dew,

Falls on a scarlet world a golden night,

Wherein slow riseth into sight

No pale-faced moon.

With giddy circlings, a strange steel-blue

And star-shaped satellite

Whirls through the golden blare.

As nervous starfish shun the touch,

So shoot her shrinking fingers forth,

Point East and South, point West and North,

Her mazy moving radiants such

A thousand changes wear.

They flash from her steely shield

Like a myriad scimitars,

As she laces her golden field

With

title: Page:The Yellow Book - 06.djvu/272


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/817

 PUBLIC LAW 98-369—JULY 18, 1984 "(C) the amount of any endowment benefit (or sum of endowment benefits, including any cash surrender value on the maturity date described in subparagraph (B)) shall be deemed not to exceed the least amount payable as a death benefit at any time under the contract. "(2) LIMITED INCREASES IN DEATH BENEFIT PERMITTED.—Not-

withstanding paragraph (I)(A)— "(A) for purposes of computing the guideline level premium, an increase in the death benefit which is provided in the contract may be taken into account but only to the extent necessary to prevent a decrease in the excess of the death benefit over the cash surrender value of the contract, and "(B) for purposes of the cash value accumulation test, the increase described in subparagraph (A) may be taken into account if the contract will meet such test at all times assuming that the net level reserve (determined as if level annual premiums were paid for the contract over a period not ending before the insured attains age 95) is substituted for the net single premium. "(f) OTHER DEFINITIONS AND SPECIAL RULES,—For purposes of this section— "(1) PREMIUMS PAID.—

"(A) IN GENERAL.—The term 'premiums paid' means the premiums paid under the contract less amounts (other than amounts includible in gross income) to which section 72(e) applies and less any other amounts received with respect to the contract which are specified in regulations. "(B) TREATMENT OF CERTAIN PREMIUMS RETURNED TO POL-

ICYHOLDER.—If, in order to comply with the requirements of subsection (a)(2)(A), any portion of any premium paid during any contract year is returned by the insurance company (with interest) within 60 days after the end of a contract year, the amount so returned (excluding interest) shall be deemed to reduce the sum of the premiums paid under the contract during such year. "(C) INTEREST RETURNED INCLUDIBLE IN GROSS INCOME.—

Notwithstanding the provisions of section 72(e), the amount of any interest returned as provided in subparagraph (B) shall be includible in the gross income of the recipient. "(2) CASH VALUES.— "(A) CASH SURRENDER VALUE.—The

cash surrender value of any contract shall be its cash value determined without regard to any surrender charge, policy loan, or reasonable termination dividends. "(B) NET SURRENDER VALUE.—The net surrender value of any contract shall be determined with regard to surrender charges but without regard to any policy loan. "(3) DEATH BENEFIT.—The term death benefit' means the amount payable by reason of the death of the insured (determined without regard to any qualified additional benefits). "(4) FUTURE BENEFITS.—The term 'future benefits' means death benefits and endowment benefits. "(5) QUALIFIED ADDITIONAL BENEFITS.—

"(A) IN GENERAL.—The term 'qualified additional benefits' means any— "(i) guaranteed insurability,

98 STAT. 769

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/818

 98 STAT. 770

PUBLIC LAW 98-369—JULY 18, 1984 "(ii) accidental death or disability benefit, "(iii) family term coverage, "(iv) disability waiver benefit, or "(v) other benefit prescribed under regulations. "(B) TREATMENT OF QUALIFIED ADDITIONAL BENEFITS,—For

purposes of this section, qualified additional benefits shall not be treated as future benefits under the contract, but the charges for such benefits shall be treated as future benefits. "(C) TREATMENT OP OTHER ADDITIONAL BENEFITS.—In the

case of any additional benefit which is not a qualified additional benefit— "(i) such benefit shall not be treated as a future benefit, and "(ii) any charge for such benefit which is not prefunded shall not be treated as a premium. "(6) PREMIUM PAYMENTS NOT DISQUAUFYING CONTRACT.—The

payment of a premium which would result in the sum of the premiums paid exceeding the guideline premium limitation shall be disregarded for purposes of subsection (a)(2) if the amount of such premium does not exceed the amount necessary to prevent the termination of the contract on or before the end of the contract year (but only if the contract will have no cash surrender value at the end of such extension period). "(7) ADJUSTMENTS.—

"(A) IN GENERAL.—In the event of a change in the future benefits or any qualified additional benefit (or in any other terms) under the contract which was not reflected in any previous determination made under this section, under regulations prescribed by the Secretary, there shall be proper adjustments in future determinations made under this section. "(B) CERTAIN CHANGES TREATED AS EXCHANGE.—In

the

case of any change which reduces the future benefits under the contract, such change shall be treated as an exchange of the contract for another contract. "(8) CORRECTION OF ERRORS.—If the tgixpayer establishes to the

satisfaction of the Secretary that— "(A) the requirements described in subsection (a) for any contract year were not satisfied due to reasonable error, and "(B) reasonable steps are being taken to remedy the error, the Secretary may waive the failure to satisfy such requirements. "(9) SPECIAL RULE FOR VARIABLE LIFE INSURANCE CONTRACTS.—

Ante, p. 750.

In the case of any contract which is a variable contract (as defined in section 817), the determination of whether such contract meets the requirements of subsection (a) shall be made whenever the death benefits under such contract change but not less frequently than once during each 12-month period. "(g) TREATMENT OF CONTRACTS WHICH DO NOT MEET SUBSECTION (a) TEST.— "(1) INCOME INCLUSION.—

"(A) IN GENERAL.—If at any time any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), the income on the contract for any taxable year of

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/819

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 771

the policyholder shall be treated as ordinary income received or accrued by the policyholder during such year. "(B) INCOME ON THE CONTRACT.—For purposes of this paragraph, the term 'income on the contract means, with respect to any taxable year of the policyholder, the excess of— "(i) the sum of— "(I) the increase in the net surrender value of the contract during the taxable year, and "(II) the cost of life insurance protection provided under the contract during the taxable year, over "(ii) the amount of premiums paid under the contract during the taxable year reduced by any policyholder dividends received during such taxable year. "(C) CONTRACTS WHICH CEASE TO MEET DEFINITION.—If,

during any taxable year of the policyholder, a contract which is a life insurance contract under the applicable law ceases to meet the definition of life insurance contract under subsection (a), the income on the contract for all prior taxable years shall be treated as received or accrued during the taxable year in which such cessation occurs. "(D) COST OF U F E INSURANCE PROTECTION.—For purposes of this paragraph, the cost of life insurance protection provided under the contract shall be the lesser of— "(i) the cost of individual insurance on the life of the insured as determined on the basis of uniform premiums (computed on the basis of 5-year age brackets) prescribed by the Secretary by regulations, or "(ii) the mortality charge (if any) stated in the contract.

i (-:)?;.'"£

Xv r„

"(2) TREATMENT OF AMOUNT PAID ON DEATH OF INSURED.—If

any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), the excess of the amount paid by the reason of the death of the insured over the net surrender value of the contract shall be deemed to be paid under a life insurance contract for purposes of section 101 and subtitle B. "(3) CONTRACT CONTINUES TO BE TREATED AS INSURANCE CON-

TRACT.—If any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), such contract shall, notwithstanding such failure, be treated as an insurance contract for purposes of this title. "(h) ENDOWMENT CONTRACTS RECEIVE SAME TREATMENT.—

"(1) IN GENERAL.—References in subsections (a) and (g) to a life insurance contract shall be treated as including references to a contract which is an endowment contract under the applicable law. "(2) DEFINITION OF ENDOWMENT CONTRACT.—For purposes of this title (other than paragraph (1)), the term 'endowment contract' means a contract which is an endowment contract under the applicable law and which meets the requirements of subsection (a), "(i) TRANSITIONAL RULE FOR CERTAIN 20-PAY CONTRACTS.—

"(1) IN GENERAL.—In the case of a qualified 20-pay contract, this section shall be applied by substituting '3 percent' for '4 percent' in subsection (b)(2).

26 USC 2001.

�


text:
Page:The Yellow Book - 06.djvu/273

 With its splutter of blue black stars.

Thus is the gamut set

From palest orange unto purplest jet.

Then the malachite beings grow glittering bronze

With feeling, with passion, agleam, aglow,

In touch with their molten rosy world.

Green fire flashes from their jewelled breasts,

Where flame a thousand ages,

Whilst their broad pinions spread, quiver to the quill.

Forth from each beauteous head leap forked tongues ;

A rushing sound as music of a stream

Stirs the still air with sweet strange speech

That writes its meanings on the atmosphere.

The flashing hieroglyphics scintillate,

Among the purple shades, fork-lightning quick.

Between the waving wings

The younger beings feel and see and hear,

And on their brains the branded image sinks

Of quiv'ring naked knowledge newly born.

The seeming solid ground uncertain heaves,

Stretching to slender threads the pliant chain,

The easy fetters of a lessened gravity.

These buoyant beings rise and madly dance

Wide stepping as the winds, their waving wings

Mingling in one green cloud,

Which bronzing in the golden night

Drifts out of sight.

Gone

title: Page:The Yellow Book - 06.djvu/273


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/820

 98 STAT. 772

PUBLIC LAW 98-369—JULY 18, 1984 "(2) QuAUFiED 20-PAY CONTRACT.—For purposes of paragraph (1), the term 'qualified 20-pay contract' means any contract which— "(A) requires at least 20 nondecreasing annual premium payments, and "(B) is issued pursuant to an existing plan of insurance. "(3) EXISTING PLAN OF INSURANCE.—For purposes of this subsection, the term 'existing plan of insurance' means, with respect to any contract, any plan of insurance which was filed by the company issuing such contract in 1 or more States before September 28, 1983, and is on file in the appropriate State for such contract. "0") REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section,". (b) 1-YEAR EXTENSION OF FLEXIBLE PREMIUM CONTRACT PROVISIONS.—

26 USC 101 note.

(1) IN GENERAL.—Paragraph (1) of section 266(c) of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by striking out "January 1, 1984" and inserting in lieu thereof "January 1, 1985". (2) TECHNICAL AMENDMENTS.—

26 USC 101.

(A) Paragraph (1) of section 101(f) is amended by striking out "flexible premium life insurance contract" and inserting in lieu thereof "flexible premium life insurance contract issued before January 1, 1985". (B) The subsection heading of subsection (f) of section 101 is amended by striking out "FLEXIBLE PREMIUM CONTRACTS" and inserting in lieu thereof "FLEXIBLE PREMIUM CONTRACTS ISSUED BEFORE JANUARY 1, 1985".

(c) CLERICAL AMENDMENT.—The table of sections for chapter 79 is amended by adding at the end thereof the following new item: "Sec. 7702. Life insurance contract defined.". 26 USC 7702

note.

(d) EFFECTIVE D A T E. —

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to contracts issued after December 31, 1984, in taxable years ending after such date. (2) SPECIAL RULE FOR CERTAIN CONTRACTS ISSUED AFTER JUNE

30, 1984.—

(A) GENERAL RULE.—Except as otherwise provided in this paragraph, the amendments made by this section shall apply also to any contract issued after June 30, 1984, which provides an increasing death benefit and has premium funding more rapid that 10-year level premium payments. (B) EXCEPTION FOR CERTAIN CONTRACTS.—Subparagraph

(A) shall not apply to any contract if— (i) such contract (whether or not a flexible premium contract) would meet the requirements of section 101(f) of the Internal Revenue Code of 1954, (ii) such contract is not a flexible premium life insurance contract (within the meaning of section 101(f) of such Code) and would meet the requirements of section 7702 of such Code determined by— (I) substituting "3 percent" for "4 percent" in section 7702(b)(2) of such Code, and

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/821

 PUBLIC LAW 98-369—JULY 18, 1984 (II) treating subparagraph (B) of section 7702(e)(l) of such Code as if it read as follows: "the maturity date shall be the latest maturity date permitted under the contract, but not less than 20 years after the date of issue or (if earlier) age 95", or (iii) under such contract— (I) the premiums (including any policy fees) will be adjusted from time-to-time to reflect the level amount necessary (but not less than zero) at the time of such adjustment to provide a level death benefit assuming interest crediting and an annual effective interest rate of not less than 3 percent, or (II) at the option of the insured, in lieu of an adjustment under subclause (I) there will be a comparable adjustment in the amount of the death benefit. (C) CERTAIN CONTRACTS ISSUED BEFORE OCTOBER i, 1984.— (i) IN GENERAL.—Subparagraph (A) shall be applied by substituting "September 30, 1984" for "June 30, 1984" in clause (i) thereof in the case of a contract— (I) which would meet the requirements of section 7702 of such Code if "3 percent" were substituted for "4 percent" in section 7702(b)(2) of such Code, and the rate or rates guaranteed on issuance of the contract were determined without regard to any mortality charges, and (II) the cash surrender value of which does not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract, (ii) DEFINITIONS.—For purposes of clause (i)— (I) IN GENERAL.—Except as provided in subclause (II), terms used in clause (i) shall have the same meanings as when used in section 7702 of such Code. (II) NET SINGLE PREMIUM.—The term "net single premium" shall be determined by substituting "3 percent" for "4 percent" in section 7702(b)(2) of such Code, by using the 1958 standard ordinary mortality and morbidity tables of the National Association of Insurance Commissioners, and by Eissuming a level death benefit. (3) TRANSITIONAL RULE FOR CERTAIN EXISTING PLANS OF INSUR-

ANCE.—A plan of insurance on file in 1 or more States before September 28, 1983, shall be treated for purposes of section 7702(i)(3) of such Code as a plan of insurance on file in 1 or more States before September 28, 1983, without regard to whether such plan of insurance is modified after September 28, 1983, to permit the crediting of excess interest or similar amounts annually and not monthly under contracts issued pursuant to such plan of insurance. (4) EXTENSION OF FLEXIBLE PREMIUM CONTRACT PROVISIONS.—

The amendments made by subsection (b) shall take effect on January 1, 1984. (5) SPECIAL RULE FOR MASTER CONTRACT.—For purposes of this subsection, in the case of a master contract, the date taken into

98 STAT. 773 Ante, p. 767.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/822

 98 STAT. 774

PUBLIC LAW 98-369—JULY 18, 1984 account with respect to any insured shall be the first date on which such insured is covered under such contract. SEC. 222. TREATMENT OF CERTAIN ANNUITY CONTRACTS. (a) PENALTY ON PREMATURE DISTRIBUTIONS.—Paragraph (1) of sec-

26 USC 72.

tion 72(q) (relating to 5-percent penalty for premature distributions from annuity contracts) is amended to read as follows: "(1) IMPOSITION OF PENALTY.—If any taxpayer receives any

amount under an annuity contract, the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 5 percent of the portion of such amount which is includible in gross income." (b) REQUIRED DISTRIBUTIONS WHERE HOLDER DIES BEFORE ENTIRE INTEREST IS DISTRIBUTED.—Section 72 (relating to annuities; certain

proceeds of endowment and life insurance contracts) is amended by redesignating subsection (s) and subsection (t) and by inserting after subsection (r) the following new subsection: "(s) REQUIRED DISTRIBUTIONS WHERE HOLDER DIES BEFORE ENTIRE INTEREST IS DISTRIBUTED.—

"(1) IN GENERAL.—A contract shall not be treated as an annuity contract for purposes of this title unless it provides that— "(A) if the holder of such contract dies on or after the annuity starting date and before the entire interest in such contract has been distributed, the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used as of the date of his death, and "(B) if the holder of such contract dies before the annuity starting date, the entire interest in such contract will be distributed within 5 years after the death of such holder. "(2) EXCEPTION FOR CERTAIN AMOUNTS PAYABLE OVER LIFE OF BENEFICIARY.—If—

"(A) any portion of the holder's interest is payable to (or for the benefit of) a designated beneficiary, "(B) such portion will be distributed (in accordance with regulations) over the life of such designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and "(C) such distributions begin not later than 1 year after the date of the holder's death or such later date as the Secretary may by regulations prescribe, then for purposes of paragraph (1), the portion referred to in subparagraph (A) shall be treated as distributed on the day on which such distributions begin. "(3) SPECIAL RULE WHERE SURVIVING SPOUSE BENEFICIARY.—If

the designated beneficiary referred to in paragraph (2)(A) is the surviving spouse of the holder of the contract, paragraphs (1) and (2) shall be applied by treating such spouse as the holder of such contract. "(4) DESIGNATED BENEFICIARY.—For purposes of this subsection, the term 'designated beneficiary' means any individual designated a beneficiary by the holder of the contract." 26 USC 72 note.

(c) EFFECTIVE D A T E S. —

(1) IN GENERAL.—The amendments made by this section shall apply to contracts issued after the day which is 6 months after

�


text:
Page:The Yellow Book - 06.djvu/274

 Gone is the scarlet sea,

The azure day,

And my rainbow reverie

Fades into grey.

title: Page:The Yellow Book - 06.djvu/274


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/823

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 775

the date of the enactment of this Act in taxable years ending after such date. (2) TRANSITIONAL RULES FOR CONTRACTS ISSUED BEFORE EFFECTIVE DATE.—In the case of any contract (other than a single

premium contract) which is issued on or before the day which is 6 months after the date of the enactment of this Act, for purposes of section 72(q)(l)(A) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this/Act), any investment in such contract which is made during any calendar year shall be treated as having been made on January 1 of such calendar year. SEC. 223. GROUP-TERM LIFE INSURANCE PURCHASED FOR EMPLOYEES. (a) SECTION 79 EXTENDED TO FORMER EMPLOYEES.—

26 USC 79.

(1) Section 79 (relating to group-term insurance purchased for employees) is amended by adding at the end thereof the following new subsection: "(e) EMPLOYEE INCLUDES FORMER EMPLOYEE.—For purposes of this section, the term 'employee' includes a former employee.' (2) Paragraph (1) of section 79(b) is amended to read as follows: "(1) the cost of group-term life insurance on the life of an individual which is provided under a policy carried directly or indirectly by an employer after such individual has terminated his employment with such employer and is disabled (within the meaning of section 72(m)(7)),". (b) AMOUNT OF INCLUSION IN CASE OF DISCRIMINATORY PLANS.—

Paragraph (1) of section 79(d) (relating to nondiscrimination requirements) is amended to read as follows: "(1) IN GENERAL.—In the case of a discriminatory group-term life insurance plan— "(A) subsection (a)(1) shall not apply with respect to any kev employee, and '(B) the cost of group-term life insurance on the life of any key employee shall be determined without regard to subsection (c)."

.

^-

(c) CLARIFICATION OF COORDINATION WITH SECTION 83.—Subsection

(e) of section 83 (relating to application of section) is amended by 26 USC 83. striking out "or" at the end of paragraph (3), by striking out the period at the end of paragraph (4) and inserting in lieu thereof ', or", and by adding at the end thereof the following new paragraph: ! "(5) the cost of group-term life insurance to which section 79 applies.". (d) EFFECTIVE DATE.— 26 USC 79 note. (1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1983. (2) INCLUSION OF FORMER EMPLOYEES IN THE CASE OF EXISTING GROUP-TERM INSURANCE PLANS.—

(A) IN GENERAL.—The amendments made by subsection (a) shall not apply— (i) to any group-term life insurance plan of the employer in existence on January 1, 1984, or (ii) to any group-term life insurance plan of the employer (or a successor employer) which is a comparable successor to a plan described in clause (i),

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/824

 98 STAT. 776

PUBLIC LAW 98-369—JULY 18, 1984 but only with respect to an individual who attained age 55 on or before January 1, 1984, and either was employed by such employer at any time during 1983 or retired from employment with such employer on or before January 1, 1984. (B) SPECIAL RULE IN THE CASE OF DISCRIMINATORY GROUPTERM LIFE INSURANCE PLAN.—In the case of any plan which,

after December 31, 1986, is a discriminatory group-term life insurance plan (as defined in section 79(d) of the Internal Revenue Code of 1954), subparagraph (A) shall not apply in the case of any individual retiring under such plan after December 31, 1986. (C) BENEFITS TO CERTAIN RETIRED INDIVIDUALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF DETERMINING WHETHER PLAN

IS DISCRIMINATORY.—For purposes of determining whether after December 31, 1986, a plan described in subparagraph (A) meets the requirements of section 79(d) of the Internal Revenue Code of 1954 with respect to group-term life insurance for former employees, coverage provided to employees who retired on or before December 31, 1986, shall not be taken into account. SEC. 224. TREATMENT OF CERTAIN EXCHANGES OF INSURANCE POLICIES. 26 USC 1035.

26 USC 1035 note.

(a) GENERAL RULE.—Paragraph (1) of section 1035(b) (defining

endowment contract) is amended by striking out "a life insurance company as defined in section 801" and inserting in lieu thereof "an insurance company subject to tax under subchapter L". (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to all exchanges whether before, on, or after the date of the enactment of this Act.

Subtitle C—Studies 26 USC 801 note.

Ante, p. 720.

26 USC 1 note.

SEC. 231. STUDIES.

(a) REVENUE REPORTS.—Not later than July 1, 1985, and July 1 of each calendar year thereafter, the Secretary of the Treasury shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on— (1) the aggregate amount of revenue received under part I of subchapter L of chapter 1 of the Internal Revenue Code of 1954 for the most recent taxable years for which data are available, (2) a comparison between the amount of such revenue and the amount anticipated by reason of changes made by the Tax Equity and Fiscal Responsibility Act of 1982 or the Life Insurance Tax Act of 1984, and (3) the reasons for any difference between such aggregate revenues and anticipated revenues. (b) REPORT WITH RESPECT TO SEGMENT BALANCE, ETC.—

(1) IN GENERAL.—The Secretary of the Treasury (in consultation with the Joint Committee on Taxation, the Committee on Ways and Means of the House of Representatives, and the Committee on Finance of the Senate) shall conduct a full and complete study of the operation of part I of subchapter L of chapter 1 of the Internal Revenue Code of 1954 during 1984, 1985, and 1986. Such study shall also include an analysis of life

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/825

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 777

insurance products and the taxation thereof. Such study shall also include an analysis of whether part I of such subchapter L operates as a disincentive to growing companies. (2) ITEMS TO BE INCLUDED.—The study conducted under paragraph (1) shall include— (A) an analysis of the portion of the taxes paid by mutual life insurance companies and stock life insurance companies, and (B) any other data considered relevant by either stock life insurance companies or mutual life insurance companies in determining appropriate segment balance, such as the respective amounts of the following items held by each segment of the industry— (i) equity, (ii) life insurance reserves, (iii) other types of reserves, (iv) dividends paid to policyholders and shareholders, (v) pension business, (vi) total assets, and (vii) gross receipts. Such report shall also include an analysis of the extent to which taxes paid by stockholders of life insurance companies shall be included in analyzing segment balance. (3) REPORTS.—

(A) INTERIM REPORTS.—The Secretary of the Treasury

shall submit interim reports on the study conducted under this subsection to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate not later than July 1, 1986, 1987, and 1988. (B) FINAL REPORT.—Not later than January 1, 1989, the Secretary of the Treasury shall submit a final report on the study conducted under this subsection to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. (c) AUTHORITY TO REQUIRE DATA.—The Secretary of the Treasury shall have authority to require reporting of such data with respect to life insurance companies and their products as may be necessary to carry out the purposes of this section.

TITLE III—REVISION OF PRIVATE FOUNDATION PROVISIONS SEC. 301. LIMITATIONS ON DEDUCTION FOR CONTRIBUTIONS TO PRIVATE FOUNDATIONS. (a) INCREASE IN PERCENTAGE LIMITATION FOR INDIVIDUALS.—

(1) IN GENERAL.—Clause (i) of section 170(b)(l)(B) (relating to percentage limitations for individuals) is amended by striking out "20 percent" and inserting in lieu thereof "30 percent'. (2) CARRYOVER OF EXCESS CONTRIBUTIONS.—Subparagraph (B)

of section 170(b)(1) is amended by adding at the end thereof the following new sentence: "If the aggregate of such contributions exceeds the limitation of the preceding sentence, such excess shall be treated (in a manner consistent with the rules of subsection (d)(l)) as a charitable contribution (to which subparagraph (A)

26 USC 170.

�


text:
Author:John Johnson

Articles in Popular Science Monthly

 * 1.

title: Author:John Johnson


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/826

 98 STAT. 778

PUBLIC LAW 98-369—JULY 18, 1984 does not apply) in each of the 5 succeeding taxable years in order of time." (b) DEDUCTION ALLOWED FOR FULL FAIR MARKET VALUE OF CERTAIN STOCK CONTRIBUTED TO PRIVATE FOUNDATIONS.—Subsection (e)

26 USC 170.

of section 170 (relating to certain contributions of ordinary income and capital gain property) is amended by adding at the end thereof the following new paragraph: "(5) SPECIAL RULE FOR CONTRIBUTIONS OF STOCK FOR WHICH MARKET QUOTATIONS ARE READILY AVAILABLE.—

"(A) IN GENERAL.—Subparagraph (B)(ii) of paragraph (1) shall not apply to any contribution of qualified appreciated stock. "(B) QUALIFIED APPRECIATED STOCK.—Except as provided in subparagraph (C), for purposes of this paragraph, the term 'qualified appreciated stock' means any stock of a corporation— "(i) for which (as of the date of the contribution) market quotations are readily available on an established securities market, and "(ii) which is capital gain property (as defined in subsection (b)(l)(C)(iv)). "(C) DONOR MAY NOT CONTRIBUTE MORE THAN lo PERCENT OF STOCK OF CORPORATION.—

"(i) IN GENERAL.—In the case of any donor, the term 'qualified appreciated stock' shall not include any stock of a corporation contributed by the donor in a contribution to which paragraph (l)(B)(ii) applies (determined without regard to this paragraph) to the extent that the amount of the stock so contributed (when increased by the aggregate amount of all prior such contributions by the donor of stock in such corporation) exceeds 10 percent (in value) of all of the outstanding stock of such corporation. "(ii) SPECIAL RULE.—For purposes of clause (i), an individual shall be treated as making all contributions made by any member of his family (as defined in section 267(c)(4)). "(D) TERMINATION.—This paragraph shall not apply to contributions made after December 31, 1994." (c) 20-PERCENT LIMITATION RETAINED FOR CONTRIBUTIONS OF CAPITAL GAIN PROPERTY.—

(1) IN GENERAL.—Paragraph (1) of section 170(b) (relating to percentage limitations for individuals) is amended by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph: "(D) SPECIAL LIMITATION WITH RESPECT TO CONTRIBUTIONS OF CAPITAL GAIN PROPERTY TO ORGANIZATIONS NOT DESCRIBED IN SUBPARAGRAPH (A).—

"(i) IN GENERAL.—In the case of charitable contributions (other than charitable contributions to which subparagraph (A) applies) of capital gain property, the total amount of such contributions of such property taken into account under subsection (a) for any taxable year shall not exceed the lesser of— "(I) 20 percent of the taxpayer's contribution base for the taxable year, or

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/827

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 779

"(ID the excess of 30 percent of the taxpayer's contribution base for the taxable year over the amount of the contributions of capital gain property to which subparagraph (C) applies. For purposes of this subsection, contributions of capital gain property to which this subparagraph applies shall be taken into account after all other charitable contributions. "(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the limitation of clause (i), such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution of capital gain property to which clause (i) applies in each of the 5 succeeding taxable years in order of time." (2) TECHNICAL AMENDMENTS.—

(A) Clause (vii) of section 170(b)(l)(A) is amended by strik- 26 USC 170. ing out "subparagraph (D)" and inserting in lieu thereof "subparagraph (E)". (B) The subparagraph heading and clause (i) of subparagraph (C) of section 170(b)(1) are amended to read as follows: ...

"(C) SPECIAL LIMITATION WITH RESPECT TO CONTRIBUTIONS DESCRIBED IN SUBPARAGRAPH (A) OF CERTAIN CAPITAL GAIN PROPERTY.—

"(i) In the case of charitable contributions described in subparagraph (A) of capital gain property to which subsection (e)(1)(B) does not apply, the total amount of contributions of such property which may be taken into account under subsection (a) for any taxable year shall not exceed 30 percent of the taxpayer's contribution base for such year. For purposes of this subsection, contributions of capital gain property to which this subparagraph applies shall be taken into account after all other charitable contributions (other than charitable contributions to which subparagraph (D) applies)." (C) Subparagraph (B) of section 170(e)(l) is amended by striking out "subsection (b)(l)(D)" and inserting in lieu thereof "subsection (b)(l)(E)". (d) EFFECTIVE DATES.— 26 USC 170 (1) SUBSECTIONS (a) AND (C).—The amendments made by sub- note.

sections (a) and (c) shall apply to contributions made in taxable years ending after the date of the enactment of thfe Act. (2) SUBSECTION (b).—The amendment made by subsection (b) shall apply to contributions made after the date of the enactment of this Act in taxable years ending after such date.

MJ,; n v

SEC. 302. EXEMPTION FOR CERTAIN OPERATING FOUNDATIONS FROM EXCISE TAX ON INVESTMENT INCOME. (a) GENERAL RULE.—Section 4940 (relating to excise tax based on 26 USC 4940. investment income) is amended by adding at the end thereof the following new subsection: "(d) EXEMPTION FOR CERTAIN OPERATING FOUNDATIONS.—

"(1) IN GENERAL.—No tax shall be imposed by this section on any private foundation which is an exempt operating foundation for the taxable year.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/828

 98 STAT. 780

Post, p. 784.

PUBLIC LAW 98-369—JULY 18, 1984 "(2) EXEMPT OPERATING FOUNDATION.—For purposes of this subsection, the term 'exempt operating foundation' means, with respect to any taxable year, any private foundation if— "(A) such foundation is an operating foundation (as defined in section 4942(j)(3)), "(B) such foundation has been publicly supported for at least 10 taxable years, "(C) at all times during the taxable year, the governing body of such foundation— "(i) consists of individuals at least 75 percent of whom are not disqualified individuals, and "(ii) is broadly representative of the general public, and "(D) at no time during the taxable year does such foundation have an officer who is a disqualified individual. "(3) DEFINITIONS.—For purposes of this subsection— "(A) PUBLICLY SUPPORTED.—A private foundation is publicly supported for a taxable year if it meets the requirements of section 170(b)(l)(A)(vi) or 509(a)(2) for such taxable year. "(B) DISQUAUFIED INDIVIDUAL.—The term 'disqualified individual' means, with respect to any private foundation, an individual who is— "(i) a substantial contributor to the foundation, "(ii) an owner of more than 20 percent of— "(I) the total combined voting power of a corporation, "(II) the profits interest of a partnership, or "(III) the beneficial interest of a trust or unincorporated enterprise, which is a substantial contributor to the foundation, or "(iii) a member of the family of any individual described in clause (i) or (ii). "(C) SUBSTANTIAL CONTRIBUTOR.—The term 'substantied contributor' means a person who is described in section 507(d)(2). "(D) FAMILY.—The term 'family' has the meaning given to such term by section 4946(d). "(E) CONSTRUCTIVE OWNERSHIP.—The rules of paragraphs (3) and (4) of section 4946(a) shall apply for purposes of subparagraph (B)(ii)." (b) REQUIREMENT OF EXPENDITURE RESPONSIBILITY NOT TO APPLY

26 USC 4945.

Ante, p. 779.

26 USC 4940.

"^ote.

TO CERTAIN OPERATING FOUNDATIONS.—Paragraph (4) of section 4945(d) (defining taxable expenditure) is amended to read as follows: "(4) as a grant to an organization unless— "(A) such organization is described in paragraph (1), (2), or (3) of section 509(a) or is an exempt operating foundation (as defined in section 4940(d)(2)), or "(B) the private foundation exercises expenditure responsibility with respect to such grant in accordance with subsection (h), or". (c) EFFECTIVE D A T E. — (1) FOR SUBSECTION

(a).—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1984.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/829

 PUBLIC LAW 98-369—JULY 18, 1984 (2) FOR SUBSECTION (b).—The amendment made by subsection (b) shall apply to grants made after December 31, 1984, in taxable years ending after such date. (3) CERTAIN EXISTING FOUNDATIONS.—A foundation which was an operating foundation (as defined in section 4942(j)(3) of the Internal Revenue Code of 1954) as of January 1, 1983, shall be treated as meeting the requirements of section 4940(d)(2)(B) of such Code (as added by subsection (a)).

98 STAT. 781 26 USC 4945 note. 26 USC 4940 ^°Ante, p. 779.

SEC. 303. REDUCTION IN EXCISE TAX ON INVESTMENT INCOME WHERE PRIVATE FOUNDATION MEETS CERTAIN DISTRIBUTION REQUIREMENTS. (a) GENERAL RULE.—Section 4940 (relating to excise tax based on 26 USC 4940. investment income) is amended by adding at the end thereof the following new subsection: "(e) REDUCTION IN TAX WHERE PRIVATE FOUNDATION MEETS CERTAIN DISTRIBUTION REQUIREMENTS.—

"(1) IN GENERAL.—In the case of any private foundation which meets the requirements of paragraph (2) for any taxable year, subsection (a) shall be applied with respect to such taxable year by substituting '1 percent' for '2 percent'. "(2) REQUIREMENTS.—A private foundation meets the requirements of this paragraph for any taxable year if— "(A) the amount of the qualifying distributions made by the private foundation during such taxable year equals or exceeds the sum of— "(i) an amount equal to the assets of such foundation for such taxable year multiplied by the average percentage payout for the base period, plus "(ii) 1 percent of the net investment income of such foundation for such taxable year, and "(B) the average percentage payout for the base period equals or exceeds 5 percent. In the case of an operating foundation (as defined in section 4942(j)(3)), subparagraph (B) shall be applied by substituting 'SVs percent' for '5 percent. "(3) AVERAGE PERCENTAGE PAYOUT FOR BASE PERIOD.—For purposes of this subsection— "(A) IN GENERAL.—The average percentage payout for the base period is the average of the percentage payouts for taxable years in the base period. "(B) PERCENTAGE PAYOUT.—The term 'percentage payout' means, with respect to any taxable year, the percentage determined by dividing— "(i) the amount of the qualifying distributions made by the private foundation during the taxable year, by "(ii) the assets of the private foundation for the taxable year. "(C) SPECIAL RULE WHERE TAX REDUCED UNDER THIS SUB-

SECTION.—For purposes of this paragraph, if the amount of the tax imposed by this section for any taxable year in the base period is reduced by reason of this subsection, the amount of the qualifying distributions made by the private foundation during such year shall be reduced by the amount of such reduction in tax. "(4) BASE PERIOD.—For purposes of this subsection—

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/830

 98 STAT. 782

PUBLIC LAW 98-369—JULY 18, 1984 "(A) IN GENERAL.—The term 'base period' means, with respect to any taxable year, the 5 taxable years preceding such taxable year. "(B) N E W PRIVATE FOUNDATIONS, ETC.—If an organization has not been a private foundation throughout the base period referred to in subparagraph (A), the base period shall consist of the taxable years during which such foundation has been in existence. "(5) OTHER DEFINITIONS.—For purposes of this subsection— "(A) QUALIFYING DISTRIBUTION.—The term 'qualifying distribution' has the meaning given such term by section 4942(g). "(B) ASSETS.—The assets of a private foundation for any taxable year shall be treated as equal to the excess determined under section 4942(e)(1). "(6) TREATMENT OF SUCCESSOR ORGANIZATIONS, ETC.—In

26 USC 4940 note.

the

case of— "(A) a private foundation which is a successor to another private foundation, this subsection shall be applied with respect to such successor by taking into account the experience of such other foundation, and "(B) a merger, reorganization, or division of a private foundation, this subsection shall be applied under regulations prescribed by the Secretary." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1984. SEC. 304. AMENDMENT TO TAXES ON FAILURE TO DISTRIBUTE INCOME. (a) LIMIT ON AMOUNT OF CERTAIN ADMINISTRATIVE EXPENSES TAKEN INTO ACCOUNT AS QUALIFYING DISTRIBUTIONS.—

26 USC 4942.

(1) Subsection (g) of section 4942 (defining qualified distributions) is amended by adding at the end thereof the following new paragraph: "(4) LIMITATION ON ADMINISTRATIVE EXPENSES ALLOCABLE TO MAKING OF CONTRIBUTIONS, GIFTS, AND GRANTS.—

"(A) IN GENERAL.—The amount of the grant administrative expenses paid during any taxable year which may be taken into account as qualifying distributions shall not exceed the excess (if any) of— "(i).65 percent of the sum of the net assets of the private foundation for such taxable year and the immediately preceding 2 taxable years, over "(ii) the aggregate amount of grant administrative expenses paid during the 2 preceding taxable years which were taken into account as qualifying distributions. "(B) GRANT ADMINISTRATIVE EXPENSES.—For purposes of

this paragraph, the term 'grant administrative expenses' means any administrative expenses which are allocable to the making of qualified grants. "(C) QuAUFiED GRANTS.—For purposes of this paragraph, the term 'qualified grant' means any contribution, gift, or grant which is a qualifying distribution. "(D) NET ASSET.—For purposes of this paragraph, the term 'net assets' means, with respect to any taxable year, the excess determined under subsection (e)(1) for such taxable year.

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/831

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 783

"(E) TRANSITIONAL RULE.—In the case of any preceding taxable year which begins before January 1, 1985, the amount of the grant administrative expenses taken into account under subparagraph (A)(ii) shall not exceed.65 percent of the net assets of the private foundation for such taxable year. "(F) TERMINATION.—This paragraph shall not apply to taxable years beginning after December 31, 1990." (2) Subparagraph (A) of section 4942(g)(1) (defining qualifying 26 USC 4942. distribution) is amended by striking out "including administrative expenses" and inserting in lieu thereof "including that portion of reasonable and necessary administrative expenses". (b) REQUIRED DISTRIBUTION INCREASED BY AMOUNT OF CERTAIN REPAYMENTS, ETC.—Paragraph (1) of section 4942(d) (defining dis-

tributable amount) is amended to read as follows: "(1) the sum of the minimum investment return plus the amounts described in subsection (f)(2)(C), reduced by". (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 4942 apply to taxable years beginning after December 31, 1984. ^°^SEC. 305. ABATEMENT OF FIRST TIER TAXES IN CERTAIN CASES.

(a) GENERAL RULE.—Subchapter C of chapter 42 (relating to abatement of second tier taxes) is amended by redesignating section 4962 as section 4963 and by inserting after section 4961 the following new 26 USC 4963. section: "SEC. 4962. ABATEMENT OF PRIVATE FOUNDATION FIRST TIER TAXES IN 26 USC 4962. CERTAIN CASES.

"(a) GENERAL RULE.—If it is established to the satisfaction of the Secretary that— "(1) a taxable event was due to reasonable cause and not to willful neglect, and "(2) such event was corrected within the correction period for such event, then any private foundation first tier tax imposed with respect to such event (including interest) shall not be assessed and, if assessed, the assessment shall be abated and, if collected, shall be credited or refunded as an overpa5mient. "(b) PRIVATE FOUNDATION FIRST TIER TAX.—For purposes of this section, the term 'private foundation first tier tax' means any first tier tax imposed by subchapter A of chapter 42, except that such 26 USC 4940. term shall not include the tax imposed by section 4941(a) (relating to initial tax on self-dealing)." (b) CONFORMING AMENDMENTS.— 26 USC prec. (1) The heading of subchapter C of chapter 42 is amended to 4961. read as follows:

"Subchapter C—Abatement of First and Second Tier Taxes in Certain Cases". (2) The table of sections for subchapter C of chapter 42 is amended by striking out the item relating to section 4962 and inserting in lieu thereof the following: "Sec. 4962. Abatement of private foundation first tier taxes in certain cases. "Sec. 4963. Definitions."

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/832

 98 STAT. 784

PUBLIC LAW 98-369—JULY 18, 1984 (3) The table of subchapters for chapter 42 is amended by striking out the item relating to subchapter C and inserting in lieu thereof the following: "SUBCHAPTER C. Abatement of first and second tier taxes in certain cases."

26 USC 4942, 6213, 6503. 26 USC 4962 note. 26 USC 4946.

(4) Sections 4942(g)(2)(C), 6213(e), and 6503(g) are each amended by striking out "section 4962(e)" and inserting in lieu thereof "section 4963(e)". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable events occurring after December 31, 1984. SEC. 306. MISCELLANEOUS AMENDMENTS. (a) DEFINITION OF FAMILY MEMBER.—Subsection (d) of section 4946 (defining members of family) is amended to read as follows: "(d) MEMBERS OF FAMILY.—For purposes of subsection (a)(D, the family of any individual shall include only his spouse, ancestors, children, grandchildren, great grandchildren, and the spouses of children, grandchildren, and great grandchildren." (b) REQUIREMENT THAT ANNUAL NOTICE INCLUDE TELEPHONE

NUMBER OF THE PRIVATE FOUNDATION.—Subsection (d) of section

26 USC 6104.

26 USC 4946 note.

26 USC 4943.

6104 (relating to public inspection of private foundations' annual returns) is amended by striking out "shall state the address of the private foundation's principal office" and inserting in lieu thereof shall state the address and the telephone number of the private foundation's principal office". (c) EFFECTIVE DATES.—The amendments made by this subsection shall take effect on January 1, 1985. SEC. 307. 5-YEAR EXTENSION OF REQUIREMENT TO DISPOSE OF CERTAIN EXCESS HOLDINGS ATTRIBUTABLE TO LARGE GIFTS AND BEQUESTS. (a) GENERAL RULE.—Subsection (c) of section 4943 (relating to taxes on excess business holdings) is amended by adding at the end thereof the following new paragraph: "(7) 5-YEAR EXTENSION OF PERIOD TO DISPOSE OF CERTAIN LARGE GIFTS AND BEQUESTS.—The Secretary may extend for an additional 5-year period the period under paragraph (6) for disposing of excess business holdings in the case of an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures if—• "(A) the foundation establishes that— "(i) diligent efforts to dispose of such holdings have been made within the initial 5-year period, and "(ii) disposition within the initial 5-year period has not been possible (except at a price substantially below fair market value) by reason of such size and complexity or diversity of such holdings, "(B) before the close of the initial 5-year period— "(i) the private foundation submits to the Secretary a plan for disposing of all of the excess business holdings involved in the extension, and "(ii) the private foundation submits the plan described in clause (i) to the Attorney General (or other appropriate State official) having administrative or supervisory authority or responsibility with respect to the foundation's disposition of the excess business holdings involved and submits to the Secretary any response received by the private foundation from the

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/833

 PUBLIC LAW 98-369—JULY 18, 1984 .-,: >-..

98 STAT. 785

Attorney General (or other appropriate State official) to such plan during such 5-year period, and "(C) the Secretary determines that such plan can reasonably he expected to be carried out before the close of the extension period."

'^*'

(b) EFFECTIVE DATE.— 26 USC 4943 (1) IN GENERAL.—The amendment made by subsection (a) ^°^^shall apply to business holdings with respect to which the 5-year period described in section 4943(c)(6) of the Internal Revenue Code of 1954 ends on or after November 1, 1983. ' ' ^' (2) TRANSITIONAL RULE.—Any plan submitted to the Secretary of the Treasury or his delegate on or before the 60th day after the date of the enactment of this Act shall be treated as submitted before the close of the initial 5-year period referred to in section 4943(c)(7)(B) of the Internal Revenue Code of 1954 (as Ante, p. 784. added by subsection (a)). SEC. 308. DECREASES ATTRIBUTABLE TO STOCK ISSUANCES NOT TO REDUCE PERMITTED PERCENTAGE OF HOLDINGS WHERE DECREASE IS 2 PERCENT OR LESS. (a) GENERAL RULE.—The second sentence of clause (ii) of section 4943(c)(4)(A) (relating to present holdings) is amended to read as 26 USC 4943. follows: "For purposes of the preceding sentence, any decrease in percentage holdings attributable to issuances of stock (or to issuances of stock coupled with redemptions i |('.. of stock) shall be disregarded so long as— "(I) the net percentage decrease disregarded .^,, ~. under this sentence does not exceed 2 percent, and ..,.,, "(Il)thenumberof shares held by the foundation ',;,; is not affected by any such issuance or redemption." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 4943 shall apply to increases and decreases occurring after the date of the note. enactment of this Act. SEC. 3C9. AGGREGATION OF STOCK HOLDINGS OF PRIVATE FOUNDATION AND DISQUALIFIED PERSONS IN APPLYING 95 PERCENT OWNERSHIP TEST. (a) GENERAL RULE.—Clause (i) of section 4943(c)(4)(B) (relating to present holdings) is amended by striking out "the private foundation has" and inserting in lieu thereof "the private foundation and all disqualified persons have". (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect as if included in the amendment made by section 101(b) of the Tax Reform Act of 1969.

26 USC 4943.

26 USC 4943 T^°^26 USC prec. 4940, 4940-4948.

SEC. 310. 5-YEAR PERIOD TO DISPOSE OF EXCESS HOLDINGS RESULTING FROM CERTAIN ACQUISITIONS BY DISQUALIFIED PERSONS. (a) GENERAL RULE.—Paragraph (6) of section 4943(c) (relating to 5- 26 USC 4943. year period to dispose of gifts, bequests, etc.) is amended by adding at the end thereof the following new sentence: "In any case where an acquisition by a disqualified person would result in a substitution under clause (i) or (ii) of subpara>:*nj s; r graph (D) of paragraph (4), the preceding sentence shall be applied with respect to such acquisition as if it did not contain

31-194 0 - 86 - 27: QL. 3 Part I

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/834

 98 STAT. 786

26 USC 4943 •^o**-

PUBLIC LAW 98-369—JULY 18, 1984 the phrase 'or by a disquaUfled person' in the material preceding subparagraph (A)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to acquisitions after the date of the enactment of this Act.

SEC. 311. THE CONDUCTING OF CERTAIN GAMES OF CHANCE NOT TREATED AS UNRELATED TRADE OR BUSINESS. (a) GENERAL RULE.—For purposes of section 513 of the Internal 26 USC 513 note. Revenue Code of 1954 (defining unrelated trade or business), the term "unrelated trade or business" does not include any trade or business which consists of conducting any game of chance if— (1) such game of chance is conducted by a nonprofit organization, (2) the conducting of such game by such organization does not .a,5h»i\ violate any State or local law, and (3) as of October 5, 1983— (A) there was a State law in effect which permitted the conducting of such game of chance by such nonprofit organization, but (B) the conducting of such game of chance by organizations which were not nonprofit organizations would have .KM' violated such law. (b) EFFECTIVE DATE.—Subsection (a) shall apply to games of chance conducted after June 30, 1981, in taxable years ending after such date.

26 USC 4941 note.

~^ '•>

26 USC 507.

SEC. 312. TAX ON SELF-DEALING NOT TO APPLY TO CERTAIN STOCK PURCHASES. (a) GENERAL RULE.—Section 4941 of the Internal Revenue Code of 1954 (relating to taxes on self-dealing) shall not apply to the purchase during 1978 of stock from a private foundation (and to any note issued in connection with such purchase) if— (1) consideration for such purchase equaled or exceeded the fair market value of such stock, (2) the purchaser of such stock did not make any contribution to such foundation at any time during the 5-year period ending on the date of such purchase, (3) the aggregate contributions to such foundation by the purchaser before such date were less than $10,000 and less than 2 percent of the total contributions received by the foundation as of such date, and (4) such purchase was pursuant to the settlement of litigation involving the purchaser. (b) STATUTE OF LIMITATIONS.—If credit or refund of any overpayment of tax resulting from subsection (a) is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law, refund or credit of such overpayment may, nevertheless, be made or allowed if claim therefor is filed before the close of such 1-year period. SEC. 313. PERSON CEASES TO BE SUBSTANTIAL CONTRIBUTOR AFTER 10 YEARS WITH NO CONNECTION TO FOUNDATION. (a) GENERAL RULE.—Paragraph (2) of section 507(d) (defining substantial contributor) is amended by adding at the end thereof the following new subparagraph:

.Jf

 * T'" - iii- ' O 191

££

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/835

 PUBLIC LAW 98-369—JULY 18, 1984 w:i

98 STAT. 787

"(C) PERSON CEASES TO BE SUBSTANTIAL CONTRIBUTOR IN

CERTAIN CASES.— } "(i) IN GENERAL.—A person shall cease to be treated as a substantial contributor with respect to any private foundation as of the close of any taxable year of such foundation if— "(I) during the 10-year period ending at the close '" - ^  -A.. of such taxable year such person (and all related " persons) have not made any contribution to such private foundation, ^ "(II) at no time during such 10-year period was such person (or any related person) a foundation r^ manager of such private foundation, and "(III) the aggregate contributions made by such person (and related persons) are determined by the Secretary to be insignificant when compared to the ,, aggregate amount of contributions to such founda*'*" ' tion by one other person. For purposes of subclause (III), appreciation on contri-" butions while held by the foundation shall be taken into account. "(ii) RELATED PERSON.—For purposes of clause (i), the term 'related person' means, with respect to any person, any other person who would be a disqualified person (within the meaning of section 4946) by reason ,^. of his relationship to such person. In the case of a .. J contributor which is a corporation, the term also includes any officer or director of such corporation." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 507 note. shall apply to taxable years beginning after December 31, 1984. SEC. 314. TECHNICAL AMENDMENTS. (a) AMENDMENTS OF INTERNAL REVENUE CODE OF 1954.— (1) Subparagraph (B) of section 4942(a)(2) (relating to taxes on failure to distribute income) is amended by striking out "subsection (j)(4)" and inserting in lieu thereof "subsection (j)(2)". (2) Paragraph (1) of section 4942(f) (defining adjusted net income) is amended by striking out "subsection (d)" and inserting in lieu thereof "subsection (j)"(3) Paragraph (3) of section 6501(n) (relating to special rule for chapter 42 and similar taxes) is amended by striking out "section 4942(g)(2)(B)(i)(II)" and inserting in lieu thereof "section 4942(g)(2)(B)(ii)". (4) The amendments made by this subsection shall take effect on the date of the enactment of this Act.
 * • WILJ t?':

26 USC 4942.

Ante, p. 698.

26 USC 4942 note.

(b) AMENDMENT OF 1969 TAX REFORM ACT.—

(1) Subparagraph (A) of section 101(1)(4) of the Tax Reform Act of 1969 is amended by striking out "by substituting '51 percent' for '50 percent' " and inserting in lieu thereof "as if it did not contain the phrase ', but in no event shall the percentage so substituted be more than 50 percent' ". (2) The amendment made by paragraph (1) shall apply as if included in section 101(1)(4) of the Tax Reform Act of 1969.

26 USC 4940 note.

26 USC 4940 note.

(c) EXCEPTION TO DEFINITION OF DISQUALIFIED PERSONS.—

(1) Subsection (d) of section 4943 (relating to definitions and 26 USC 4943. special rules with respect to taxes on excess business holdings)

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/836

 98 STAT. 788

26 USC 4943 note.

PUBLIC LAW 98-369—JULY 18, 1984 is amended by adding at the end thereof the following new paragraph: "(4) DISQUALIFIED PERSON.—The term 'disqualified person' (as defined in section 4946(a)) does not include a plan described in section 4975(e)(7) with respect to the holdings of a private foundation described in paragraphs (4) and (5) of subsection (c).". (2) The amendment made by paragraph (1) shall apply with respect to taxable years beginning after the date of the enactment of this Act.

TITLE IV—TAX SIMPLIFICATION Subtitle A—Revision and SimpliHcation of Estimated Income Tax for Individuals 26 USC 6654.

26 USC 1 et seq. 26 USC 1401 et

SEC. 411. REVISION OF PENALTY FOR FAILURE TO PAY ESTIMATED INCOME TAX. Section 6654 (relating to addition to the tax for failure by individual to pay estimated income tax) is amended to read as follows: "SEC. 6654. FAILURE BY INDIVIDUAL TO PAY ESTIMATED INCOME TAX. "(a) ADDITION TO THE TAX.—Except as otherwise provided in this section, in the case of any underpayment of estimated tax by an individual, there shall be added to the tax under chapter 1 and the ^^^ under chapter 2 for the taxable year an amount determined by applying— "(1) the applicable annual rate established under section 6621, "(2) to the amount of the underpayment, "(3) for the period of the underpa5rment. "(b) AMOUNT OF UNDERPAYMENT; PERIOD OF UNDERPAYMENT.—For

M4i^:¥•

purposes of subsection (a)— "(1) AMOUNT.—The amount of the underpayment shall be the excess of— "(A) the required installment, over "(B) the amount (if any) of the installment paid on or before the due date for the installment. "(2) PERIOD OF UNDERPAYMENT.—The period of the underpay-

04 Si 'Jt

ment shall run from the due date for the installment to whichever of the following dates is the earlier— "(A) the 15th day of the 4th month following the close of the taxable year, or "(B) with respect to any portion of the underpayment, the date on which such portion is paid. "(3) ORDER OF CREDITING PAYMENTS.—For purposes of paragraph (2)(B), a payment of estimated tax shall be credited against unpaid required installments in the order in which such installments are required to be paid. "(c) NUMBER OF REQUIRED INSTALLMENTS; DUE DATES.—For purposes of this section— "(1) PAYABLE IN 4 INSTALLMENTS.—There shall be 4 required installments for each taxable year. "(2) TIME FOR PAYMENT OF INSTALLMENTS.—

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/837

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 789

"In the case of the following required installments:. The due date is: 1st April 15 2nd June 15 3rd September 15 4th January 15 of the following taxable year.

» '

"(d) AMOUNT OF REQUIRED INSTALLMENTS.—For purposes of this section— "(1) AMOUNT.—

"(A) IN GENERAL.—Except as provided in paragraph (2), the amount of any required installment shall be 25 percent of the required annual payment. "(B) REQUIRED ANNUAL PAYMENT.—For purposes of subparagraph (A), the term 'required annual payment' means the lesser of— "(i) 80 percent of the tax shown on the return for the taxable year (or, if no return is filed, 80 percent of the tax for such year), or "(ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year. Clause (ii) shall not apply if the preceding taxable year was not a taxable year of 12 months or if the individual did not file a return for such preceding taxable year.

fiiiw 1?^ ,

"(2) LOWER REQUIRED INSTALLMENT WHERE ANNUALIZED INCOME INSTALLMENT IS LESS THAN AMOUNT DETERMINED UNDER PARAGRAPH (1).—

i 1 ^

ed, ^^'

"(A) IN GENERAL.—In the case of any required installment, if the individual establishes that the annualized income installment is less than the amount determined under paragraph (1)— "(i) the amount of such required installment shall be the annualized income installment, and "(ii) any reduction in a required installment resulting from the application of this subparagraph shall be recaptured by increasing the amount of the next required installment determined under paragraph (1) by the amount of such reduction (and by increasing subsequent required installments to the extent that the reduction has not previously been recaptured under this clause). "(B)

"""• '^ ^

DETERMINATION OF ANNUALIZED INCOME INSTALL-

MENT.—In the case of any required installment, the annualized income installment is the excess (if any) of— "(i) an amount equal to the applicable percentage of the tax for the taxable year computed by placing on an annualized basis the taxable income, alternative minimum taxable income, and adjusted self-employment income for months in the taxable year ending before the due date for the installment, over "(ii) the aggregate amount of any prior required installments for the taxable year. "(C) SPECIAL RULES.—For purposes of this paragraph— "(i) ANNUALIZATION.—The taxable income, alternative minimum taxable income, and adjusted self-employment income shall be placed on an annualized basis under regulations prescribed by the Secretary, "(ii) APPLICABLE PERCENTAGE.—

^

•

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/838

 98 STAT. 790

PUBLIC LAW 98-369—JULY 18, 1984

.::.v •

"In the case of the following The applicable required installments: percentage is: 1st 20 2nd 40 3rd 60 4th 80. "(iii) ADJUSTED SELF-EMPLOYMENT INCOME.—The term

'adjusted self-employment income' means self-employment income (as defined in section 1402(b)); except that section 1402(b) shall be applied by placing wages (within the meaning of section 1402(b)) for months in the taxable year ending before the due date for the installment on an annualized basis consistent with clause (i). "(e) EXCEPTIONS.— "(1) WHERE TAX IS SMALL AMOUNT.—No addition to tax shall

be imposed under subsection (a) for any taxable year if the tax shown on the return for such taxable year (or, if no return is filed, the tax), reduced by the credit allowable under section 31, is less than $500. "(2) WHERE NO TAX LIABILITY FOR PRECEDING TAXABLE YEAR.—

No addition to tax shall be imposed under subsection (a) for any taxable year if^ "(A) the preceding taxable year was a taxable year of 12 months, "(B) the individual did not have any liability for tax for the preceding taxable year, and "(C) the individual was a citizen or resident of the United States throughout the preceding taxable year. "(3) WAIVER IN CERTAIN CASES.—

"(A) IN GENERAL.—No addition to tax shall be imposed under subsection (a) with respect to any underpayment to the extent the Secretary determines that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience. "(B) NEWLY RETIRED OR DISABLED INDIVIDUALS.—No addition to tax shall be imposed under subsection (a) with respect to any underpayment if the Secretary determines that— "(i) the taxpayer— "(I) retired after having attained age 62, or "(II) became disabled, in the taxable year for which estimated payments were required to be made or in the taxable year preceding such taxable year, and "(ii) such underpayment was due to resisonable cause and not to willful neglect. "(f) TAX COMPUTED AFTER APPLICATION OF CREDITS AGAINST

TAX.—For purposes of this section, the term 'tax' means— 26 USC 1 et seq. "(1) the tax imposed by chapter 1, plus 26 USC 1401 et "(2) the tax imposed by chapter 2, minus ««9"(3) the sum of— "(A) the credits against tax allowed by part IV of subPost, p. 826. chapter A of chapter 1, other than the credit against tax provided by section 31 (relating to tax withheld on wages), plus

�


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/839

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 791

"(B) to the extent allowed under regulations prescribed by the Secretary, any overpayment of the tax imposed by section 4986 (determined without regard to section 4995(a)(4)(B)). "(g) APPLICATION OF SECTION IN CASE OF TAX WITHHELD ON WAGES.—

"(1) IN GENERAL.—For purposes of applying this section, the amount of the credit allowed under section 31 for the taxable year shall be deemed a payment of estimated tax, and an equal part of such amount shall be deemed paid on each due date for such taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts so withheld shall be deemed payments of estimated tax on the dates on which such amounts were actually withheld. "(2) SEPARATE APPLICATION.—The taxpayer may apply paragraph (1) separately with respect to— "(A) wage withholding, and "(B) all other amounts withheld for which credit is allowed under section 31.

,, >8j xi -.i

, > 'tu

.; P j,4 < i: « ';;;s >

"(h) SPECIAL RULE WHERE RETURN FILED ON OR BEFORE JANUARY

31.—If^ on or before January 31 of the following taxable year, the taxpayer files a return for the taxable year and pays in full the amount computed on the return as payable, then no addition to tax shall be imposed under subsection (a) with respect to any underpa}'ment of the 4th required installment for the taxable year.

>vm. fisu s ^. > i is no •jr:,i} M

"(i) SPECIAL RULES FOR FARMERS AND FISHERMEN.—For purposes of

this section— "(1) IN GENERAL.—If an individual is a farmer or fisherman for any taxable year— "(A) there shall be only 1 required installment for the b taxable year, "(B) the due date for such installment shall be January 15 of the following taxable year, "(C) the amount of such installment shall be equal to the •i required annual payment (determined under subsection (d)(1)(B) by substituting '66% percent' for '80 percent', and eii i "(D) subsection (h) shall be applied— "(i) by substituting 'March 1' for 'January 31', and "(ii) by treating the required installment described in subparagraph (A) of this paragraph as the 4th required installment. ' "(2) FARMER OR FISHERMAN DEFINED.—An individual is a farmer or fisherman for any tsixable year if— "(A) the individual's gross income from farming or fishing (including oyster farming) for the taxable year is at B it I least 66% percent of the total gross income from all sources for the taxable year, or "(B) such individual's gross income from farming or fishing (including oyster farming) shown on the return of the individual for the preceding taxable year is at least 66% 1:percent of the total gross income from all sources shown on such return, "(j) FISCAL YEARS AND SHORT YEARS.— "(1) FISCAL YEARS.—In applying this

section to a taxable year beginning on any date other than January 1, there shall be substituted, for the months specified in this section, the months which correspond thereto.

,:; •jcu m. r^" q tup H ^ ^s m

 * f h'l

«^. m
 * T • J.S

t'TV xsi^?£

�