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Page:United States Statutes at Large Volume 96 Part 1.djvu/577

 PUBLIC LAW 97-248—SEPT. 3, 1982 SEC.

256. SPECIAL ACCOUNTING SECTION 820.

RULES

RELATING

TO REPEAL

96 STAT. 535 OF

(a) IN GENERAL. — For purposes of subchapter L of chapter 1 of the I n t e r n a l Revenue Code of 1954, the provisions of this section shall apply to any contract— (1) which was in effect on December 31, 1981, and (2) to which section 820(a)(1) of such Code (as in effect before its repeal by section 255(a)) applied. (b) T R E A T M ENT OF RESERVES AND ASSETS.—Except as provided in

subsections (c) and (d), the reserves on the contract described in subsection (a) and the assets in relation to such reserves shall— (1) as of the beginning of taxable year 1982, be treated as the reserves and assets of the reinsurer (and not the reinsured), and (2) as of the e n d of taxable year 1982, be treated as the reserves and assets of the reinsured (and not the reinsurer). (c) ALLOCATION OF CERTAIN SECTION 820(c) I T E M S. — Any a m o u n t

described in paragraph s (1), (2), (4), and (5) of section 820(c) of such Code (as so in effect) with respect to any contract described in subsection (a) shall, beginning with taxable year 1982, be t a k e n into account by the reinsured and the reinsurer in the same m a n n e r as such a m o u n t s would be t a k e n into account under a modified coinsurance contract to which section 820(a)(1) of such Code (as so in effect) does not apply. (d) A M O U N T S TREATED AS R E T U R N E D U N D E R THE CONTRACT.—

(1) IN GENERAL.—For taxable year 1982— (A) in the case of the reinsurer, the r e shall be allowed as a deduction for ordinary and necessary business expenses under section 809(d)(ll) of such Code a n a m o u n t equal to the termination a m o u n t (and such a m o u n t shall not otherwise be t a k e n into account in determining gain or loss from operations under section 809 of such Code), and (B) in the case of the reinsured, the gross a m o u n t under section 809(c)(3) of such Code shall be increased by the termination amount. (2) ADJUSTMENT FOR RESERVES OF REINSURED.—For purposes of

subsections (a) and (b) of section 810 of such Code, the a m o u n t t a k e n into account as of the close of taxable year 1982 by the reinsured shall be reduced for such taxable year (but not for purposes of determining such a m o u n t a t the beginning of the next succeeding taxable year) by the excess (if any) of— (A) the reserves on the contract as of January 1, 1982 (determined under the reinsured's method of computing reserves for tax purposes), over (B) the termination a m o u n t. This paragraph shall not apply to any portion of any policies with respect to which the tax p a y e r is both the reinsured and the reinsurer under contracts to which this section applies. (3) TERMINATION A M O U N T. — For purposes of t h i s subsection,

the term "termination amount" means the amount under the contract which the reinsurer would have r e t u r n e d to the reinsured upon termination of the contract if the contract h a d been term i n a t e d as of January 1, 1982. (4) CERTAIN AMOUNTS NOT TAKEN INTO ACCOUNT UNDER SEC-

TION 809(d)(5).—Any a m o u n t treated as the reserves of the reinsured by reason of subsection (b)(2) shall not be t a k e n into

97-200 O—84—pt, 1

19: QL3

26 USC 809 note.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/578

 96 STAT. 536

PUBLIC LAW 97-248—SEPT. 3, 1982 account under section 809(d)(5) of the I n t e r n a l Revenue Code of 1954. (e) 3-YEAR INSTALLMENT P A Y M E N T OF T A X E S O W E D BY REINSURER RESULTING F R O M R E P E A L OF SECTION 820.—

26 USC 31.

(1) IN GENERAL.—That portion of any tax imposed under chapter 1 of such Code (reduced by the s u m of the credits allowable under subpart A of part IV of such chapter) on a reinsurer for taxable year 1982 which is a t t r i b u t a b l e to the excess (if any) of— (A) any decrease in reserves for such taxable year by reason of subsection (b), over (B) the a m o u n t allowable as a deduction for such taxable year by reason of subsection (d)(1)(A), may, a t the election of the reinsurer, be paid in 3 equal annual installments. (2) T I M E FOR PAYMENTS.—

(A) IN GENERAL.—The 3 installments under paragraph (1) shall be paid on March 15 of 1983, 1984, and 1985. (B) F I R S T INSTALLMENT MAY BE MADE IN 2 PAYMENTS.—The

reinsurer may elect to pay one-half of the installment d u e March 15, 1983, on June 15, 1983. (3) ACCELERATION OF PAYMENTS.—If—

(A) a n election is m a d e under paragraph (1), and (B) before the tax a t t r i b u t a b l e to such excess is paid in full any installment under this section is not paid on or before the date fixed by t h i s section for its payment, then the extension of time for payment of tax provided in this subsection shall cease to apply, and any portion of the tax payable in installments shall be paid on notice and d e m and from the Secretary of the Treasury or his delegate. (4) PRORATION OF DEFICIENCY TO INSTALLMENTS.—If a n election

is made under paragraph (1) and a deficiency a t t r i b u t a b l e to the excess has been assessed, the deficiency shall be prorated to such installments. The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected a t the same time as, and as part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid on notice and d e m and from the Secretary of the Treasury or his delegate. This paragraph shall not apply if the deficiency is d u e to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax. (5) BOND MAY BE REQUIRED.—If an election is made under this section, section 6165 of the I n t e r n a l Revenue Code of 1954 shall apply as though the Secretary of the Treasury or his delegate were extending the time for payment of the tax. (6) EXTENSION OF PERIOD OF LIMITATIONS.—The r u n n i n g of any

period of limitations for the collection of the tax with respect to which a n election is made under paragraph (1) shall be suspended for the period during which the r e a r e any unpaid installments of such tax. (7) INTEREST ON INSTALLMENTS.—Rules s i m i l a r to the r u l e s of

section 6601(b)(2) of such Code (without regard to the last sentence thereof) shall apply with respect to any tax for which a n election is made under paragraph (1). Ante, p. 533.

(f) SPECIAL RULE A L L O W I N G REINSURED TO REVOKE AN ELECTION U N D E R SECTION 820.—

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


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Page:United States Statutes at Large Volume 96 Part 1.djvu/579

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 537

(1) IN GENERAL.—In any case in which— (A) a tax p a y e r is the reinsured under any contract— (i) which took effect in 1980 or 1981, and (ii) with respect to which a n election under section 820 of the I n t e r n a l Revenue Code of 1954 was made, (B) the tax p a y e r has a loss from operations or its gain from operations (determined without regard to any deduction under paragraph s (3), (5), and (6) of section 809(d) of such Code) for the taxable year in which such contract took effect does not exceed the taxpayer's taxable investment income for such taxable year, (C) such contract w a s not a contract with a person who, during the taxable year in which such contract took effect, was a m e m b e r of the s a m e affiliated group (determined under section 1504 of such Code without regard to subsection (b)) of which the tax p a y e r is a member, and (D) the tax p a y e r m a k e s a n election under this subsection within 6 months after the date of the e n a c t m e n t of this Act, then the provisions of paragraph (2) shall apply.

Ante, p. 533.

(2) RULES W H I C H APPLY I F THIS SUBSECTION APPLIES.—In any

case described in paragraph (1)— (A) the tax p a y e r shall, for all taxable years, be t r e a t e d as not having made a n election under section 820 of such Code with respect to the contract described in paragraph (1), b u t (B) all other parties to the contract shall be t r e a t e d a s having made such election with respect to such contract for all taxable years. (g) TAXABLE YEAR 1982.—For purposes of this section, the term "taxable year 1982" means, with respect to any taxpayer, the first taxable year of the tax p a y e r beginning after December 31, 1981. (h) REGULATIONS.—The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary or a p p r o p r i a t e to c a r r y out the purposes of this section. Subpart B—Other R e insurance Agreements SEC. 257. DENIAL OF INTEREST DEDUCTION ON INDEBTEDNESS INCURRED IN CONNECTION WITH REINSURANCE AGREEMENTS.

(a) IN GENERAL.—Section 805(e) (relating to interest paid) is amended by adding a t the end thereof the following new sentence: "For purposes of this subpart, the interest paid for any taxable year shall not include any interest paid or accrued after December 31, 1981, by a ceding company (or its affiliates) to any person in connection with a r e insurance a g r e e m e n t (other than interest on account of delay in making periodic settlements of income and expense items under the term s of the agreement)."

26 USC 805.

(b) SPECIAL TRANSITIONAL RULE W H E R E AT LEAST 20 P E R C E N TO F THE LIABILITIES R E I N S U R E D A R E P A I D IN CASH, E T C. — The amend -

26 USC 805 note.

m e n t made by subsection (a) shall not apply with respect to any interest paid or incurred by a ceding company to a person who is a member of the s a m e affiliated group (within the m e a n i n g of section 1504 of the I n t e r n a l Revenue Code of 1954) on indebtedness evidenced by a note— (1) which was entered into after December 31, 1981, with respect to a reinsurance contract under the term s of which a n a m o u n t not less than 20 percent of the a m o u n t s reinsured w a s

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Page:United States Statutes at Large Volume 96 Part 1.djvu/580

 96 STAT. 538

PUBLIC LAW 97-248—SEPT. 3, 1982 paid in cash to the reinsurer on the effective date of such contract, (2) at least 40 percent of the principal of which had been paid by the ceding company in cash as of July 1, 1982, and (3) the remaining balance of which is paid in cash before January 1, 1983. SEC. 258. ALLOCATION OF INCOME, ETC. IN THE CASE OF OTHER REINSURANCE AGREEMENTS.

26 USC 818.

(a) IN GENERAL.—Section 818 (relating to accounting provisions) is amended by adding at the end thereof the following new subsection: "(g) ALLOCATION IN CASE OF REINSURANCE AGREEMENT INVOLVING TAX AVOIDANCE OR EVASION.—In the case of 2 or more related

persons (within the meaning of section 1239(b)) who are parties to a reinsurance agreement, the Secretary may— "(1) allocate between or among such persons income (whether investment income, premium, or otherwise), deductions, assets, reserves, credits, and other items related to such agreement, or "(2) recharacterize any such items, if he determines that such allocation or recharacterization is necessary to reflect the proper source and character of the taxable income (or any item described in paragraph (1) relating to such taxable income) of each such person.". 26 USC 818 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to agreements entered into after the date of the enactment of this Act. PART II—2-YEAR TEMPORARY PROVISIONS RELATING TO TAXATION OF LIFE INSURANCE COMPANIES SEC. 259. INCREASE IN AMOUNT OF DIVIDEND DEDUCTION ALLOWED; PENSION PLAN RESERVES.

26 USC 809.

(a) INCREASE IN LIMITATION.—Section 809(f) (relating to limitation on certain deductions) is amended to read as follows: "(fi LIMITATION ON CERTAIN DEDUCTIONS.—

"(1) IN GENERAL.—The amount of the deductions under paragraphs (3), (5), and (6) of subsection (d) shall not exceed the greater of— "(A) $1,000,000, plus the amount (if any) by which— "(i) the gain from operations for the taxable year (computed without regard to such deductions), exceeds "(ii) the taxable investment income for the taxable year, or "(B) if the taxpayer elects for any taxable year, the amount determined under paragraph (2). "(2) ALTERNATIVE LIMITATION.—The amount determined under this paragraph for any taxable year shall be equal to the sum of— "(A) that portion of the deduction under subsection (d)(3) which is allocable to any contract described in section 805(d), and "(B) an amount equal to the sum of— "(i) so much of the base amount as does not exceed $1,000,000, plus "(ii) in the case of— "(I) a mutual life insurance company, 77.5 percent of the base amount, or

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Page:United States Statutes at Large Volume 96 Part 1.djvu/581

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 539

"(II) a stock life insurance company, 85 percent of the base amount. "(3) REDUCTION I N $1,000,000 AMOUNT FOR LARGE INSURERS.—If

the sum of the deductions under paragraphs (3), (5), and (6) of subsection (d) exceeds $4,000,000, then each of the $1,000,000 amounts in paragraphs (1) and (2) shall be reduced (but not below zero) by the amount which bears the same ratio to $1,000,000 as— "(A) the amount of such excess bears to, "(B) $4,000,000. "(4) BASE AMOUNT.—For purposes of paragraph (2)(B), the term 'base amount' means the excess of— "(A) the amount of the deductions under paragraphs (3) and (5) of subsection (d) for the taxable year, over "(B) the amount determined under paragraph (2)(A) for such taxable year. "(5) APPLICATION OF LIMITATION.—The limitation provided by paragraph (1) shall apply first to the amount of the deduction under subsection (d)(3), then to the amount of the deduction under subsection (d)(5), and finally to the amount of the deduction under subsection (d)(6)." (b) $1,000,000 LIMITATION TO BE APPORTIONED AMONG MEMBERS OF SAME CONTROLLED GROUP.—Section 1561(a) (relating to limitations

26 USC 1561.

on certain multiple tax benefits in the case of certain controlled corporations) is amended— (1) by striking out "and" at the end of paragraph (2), (2) by striking out the period at the end of paragraph (3) and inserting in lieu thereof a comma and "and", (3) by inserting after paragraph (3) the following new paragraph: "(4) one $1,000,000 amount (adjusted as provided in section 809(f)(3)) for purposes of computing the limitation under para- -^ra^^. P- 538. graph (1) or (2) of section 809(f).", and (4) by striking out "(2) and (3)" and inserting in lieu thereof "(2), (3), and (4)". (c) CONFORMING AMENDMENTS.—Section 1561(b) (relating to certain short taxable years) is amended— (1) by striking out "and" at the end of paragraph (2), (2) by striking out the comma at the end of paragraph (3) and inserting in lieu thereof a comma and "and", (3) by inserting after paragraph (3) the following new paragraph: "(4) the amount (adjusted as provided in section 809(f)(3)) to be used in computing the limitation under paragraph (1) or (2) of section 809(f),", and (4) by striking out "(2), or (3)" and inserting in lieu thereof "(2), (3), or (4)". SEC. 260. COMPUTATION OF AMOUNT OF LIFE INSURANCE RESERVES. (a) RESERVES ON CONTRACTS ON WHICH CERTAIN INTEREST Is GUAR-

ANTEED BEYOND THE END OF THE TAXABLE YEAR.—Section 818 (relat-

ing to accounting provisions), as amended by section 258(a), is amended by adding at the end thereof the following new subsection: "(h) METHOD OF COMPUTING RESERVES ON CONTRACT WHERE INTEREST Is GUARANTEED BEYOND END OF TAXABLE YEAR.—For purposes

of this part (other than section 801), interest payable under any contract which is computed at a rate which—

Ante, p. 538.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/582

 96 STAT. 540

PUBLIC LAW 97-248—SEPT. 3, 1982 "(1) is in excess of the lowest r a t e s which a r e assumed under such contract for any period in calculating the reserves under section 810(c) for the contract under which such interest is payable, and "(2) is g u a r a n t e e d beyond the end of the taxable year on which the reserves a r e being computed, shall be t a k e n into account in computing the reserves with respect to such contract as if such interest were g u a r a n t e e d only up to the end of the taxable year."

26 USC 805.

(b) PROHIBITION A G A I N S T DEDUCTION OF INTEREST IN EXCESS OF A M O U N T CREDITED TO G R O U P P E N S I O N POLICYHOLDERS.—Section 805

(relating to the determination of policy and other contract liability requirements) is amended by adding a t the end thereof the following: "(g) SPECIAL LIMITATION FOR G R O U P P E N S I O N

CONTRACTS.—The

a m o u n t determined under paragraph s (2) and (3) of subsection (a) for policy and other contract liability requirements for group pension contracts shall not exceed the a m o u n t actually credited to the policyholders w h e the r such crediting is through p r e m i u m r a t e computations, reserve increases, excess interest, experience r a t e credits, policyholder dividends or otherwise. The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection." 26 USC 805 note.

(c) PROHIBITION A G A I N S T CHANGING THE QUALIFICATION S T A T U S OF L I F E INSURANCE C O M P A N I E S. — For any tax a b l e year e n d i n g before

January 1, 1984, a tax p a y e r shall not be t r e a t e d a s other than a life insurance company (as defined in section 801(a) of such Code) because of the effect of a m o u n t s held under contracts which would be described in section 805(d) of the I n t e r n a l Revenue Code of 1954, except for the fact that such contracts do not contain p e r m a n e n t a n n u i t y purchase r a t e g u a r a n t e e s. SEC. 261. MODIFICATION OF MENGE FORMULA.

26 USC 805.

Subparagraph (B) of section 805(c)(1) (defining adjusted life insurance reserves rate) is amended to read as follows: "(B) 0.9 raised to the power of n w h e r e n is the n u m b e r (positive or negative) determined by subtracting— "(i) 100 times the average r a t e of interest assumed by the tax p a y e r in calculating such reserves, from "(ii) 100 times the adjusted reserves r a t e. " SEC. 262. CONSOLIDATED RETURNS TO BE COMPUTED ON A BOTTOM LINE BASIS.

26 USC 818.

Subsection (f) of section 818 (relating to computation on consolidated r e t u r n s of policyholders' s h a r e of investment yield) is amended to read a s follows: "(f) SPECIAL RULES FOR CONSOLIDATED R E T U R N C O M P U T A T I O N S. —

For purposes of this part, in the case of a life insurance company filing or required to file a consolidated r e t u r n under section 1501 for a taxable year, the following rules shall apply: "(1) POLICYHOLDERS' SHARE OF INVESTMENT YIELD.—The com-

putation of the policyholders' s h a r e of investment yield under subpart s B and C (including all determination s and computations incident thereto) shall be made as if such company were not filing a consolidated r e t u r n. "(2) L I F E INSURANCE COMPANY TAXABLE I N C O M E. —

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 541

"(A) IN GENERAL.—The a m o u n t of the consolidated life insurance company taxable income under paragraph s (1) and (2) of section 802(b) shall be determined by taking into 26 USC 802. account the life insurance company taxable income (including any case where deductions exceed income) of each life insurance company which is a member of the group (as computed separately under such paragraphs). "(B) CERTAIN AMOUNTS COMPUTED SEPARATELY.—For pur-

poses of subparagraph (A), the determination of a life insurance company's taxable investment income and gain or loss from operations (after applying the limitation provided by section 809(f)) shall be made without regard to the taxable investment income or gain or loss from operations of any other such company. "(3) CONSOLIDATED N E T CAPITAL G A I N. — I f the r e is a consoli-

dated n e t capital gain, the n the partial tax referred to in section 802(a)(2)(A) shall be computed on— "(A) the consolidated life insurance company taxable income, reduced (but not below the s u m of the a m o u n t s determined under section 802(b)(3)) by "(B) the a m o u n t of such consolidated n e t capital gain." SEC. 263. EFFECTIVE DATES; SPECIAL RULES APPLICABLE TO TRANSACTIONS BEFORE EFFECTIVE DATE. (a) EFFECTIVE D A T E S. —

26 USC 805 note.

(1) IN GENERAL.—Except a s provided in this subsection, the amendments made by this part shall apply to taxable years beginning after December 31, 1981, and before January 1, 1984. (2) G R O U P PENSION CONTRACTS.—The amendments

m a d e by

section 260(b) shall apply to taxable years beginning December 31, 1982, and before January 1, 1984.

after

(3) RESERVES O N CONTRACTS WHERE INTEREST GUARANTEED FOR EXTENDED PERIODS.—

(A) IN GENERAL.—The amendment made by section 260(a) shall apply to reserves computed for taxable years beginning after December 31, 1981, and before January 1, 1984, with respect to g u a r a n t e e s made after July 1, 1982, and before January 1, 1984. (B) SPECIAL RULE RELATING TO RESERVES.—If, for any tax-

able year beginning before January 1, 1982— (i) a tax p a y e r increased reserves pursuant to section 810(c)(4) of the I n t e r n a l Revenue Code of 1954 to reflect interest g u a r a n t e e d beyond the end of such taxable year, and (ii) the Federal income tax liability of such tax p a y e r for all taxable years would be the s a m e if such liability was computed with or without regard to such reserves, the n such reserves shall, a s of the beginning of the first taxable year of the taxpayer beginning after December 31, 1981, be recomputed as if section 818(h) of such Code (as Ante,p.5S9. added by this Act) applied to such reserves. If this subparagraph applies to any taxpayer, subparagraph (A) shall be applied with respect to such tax p a y e r by striking out "after July 1, 1982, and". (b) SPECIAL RULES FOR CERTAIN TRANSACTIONS IN TAXABLE YEARS B E G I N N I N G BEFORE J A N U A R Y 1, 1982.— (1) CERTAIN INTEREST AND P R E M I U M S. —

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text: The Liberty to Trade as Buttressed by National Law/Monopolies


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Page:United States Statutes at Large Volume 96 Part 1.djvu/584

 96 STAT. 542

26 USC 811. Ante, p. 534.

PUBLIC LAW 97-248—SEPT. 3, 1982 (A) IN GENERAL.—In the case of any taxable year beginning before January 1, 1982, if a taxpayer, on his r e t u r n of tax for such taxable year, treated— (i) any a m o u n t described in subparagraph (B) as a n a m o u n t which was not a dividend to policyholders (within the m e a n i n g of section 811 of the I n t e r n a l Revenue Code of 1954), or (ii) any a m o u n t described in subparagraph (C) a s not described in section 809(c)(1), the n such a m o u n t s shall be so t r e a t e d for purposes of the I n t e r n a l Revenue Code of 1954. (B) CERTAIN INTEREST.—An a m o u n t is described in this subparagraph if such a m o u n t is in the n a t u r e of interest accrued for the taxable year on a n insurance or a n n u i t y contract pursuant to— (i) a n interest r a t e g u a r a n t e e d or fixed before the period of payment of such a m o u n t begins, or (ii) any other method (fixed before such period begins) the term s of which during the period a r e beyond the control and a r e independent of the experience of the company, w h e the r or not the interest r a t e or other method was g u a r a n t e e d or fixed for any specified period of time. (C) A M O U N T S NOT TREATED AS P R E M I U M S. — A n a m o u n t is

described in this subparagraph if such a m o u n t represents the difference between— (i) the a m o u n t of p r e m i u m s received or mortality charges made under r a t e s fixed in advance of the premium or mortality charge due date, and (ii) the maximum p r e m i u m or mortality charge which could be charged under the term s of the insurance or a n n u i t y contract. (D) N o INFERENCE.—The provisions of this paragraph shall constitute no inference with respect to the t r e a t m e n t of any item in taxable years beginning after December 31, 1981. (2) CONSOLIDATED R E T U R N S. — The provisions of section 818(0 of

such Code, as amended by section 262, shall apply to any taxable year beginning before January 1, 1982, if the tax p a y e r filed a consolidated r e t u r n before July 1, 1982 for such taxable year under section 1501 of such Code which, on such date (determined without regard to any amended r e t u r n filed after June 30, 1982), was consistent with the provisions of section 818(f) of such Code, as so amended. In the case of a taxable year beginning in 1981, the preceding sentence shall be applied by substituting "September 16" for " July 1" and "September 15" for " June 30". (3) TAXABLE YEARS WHERE PERIOD OF LIMITATION HAS R U N. —

This subsection shall not apply to any taxable year with respect to which the statute of limitations for filing a claim for credit or refund has expired under any provision of law or by operation of law.

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 543

PART III—EXCESS INTEREST; AMOUNTS RECEIVED UNDER ANNUITY CONTRACTS; FLEXIBLE PREMIUM CONTRACTS; COMPUTATION OF RESERVES SKC. 264. ALLOWANC E OF DKDUCTION FOR KXCKSS INTKRKST.

(a) IN GENERAL.—Subsection (e) of section 805 (defining interest paid) is amended by adding a t the end thereof the following new paragraph: "(5) QUALIFIED GUARANTEED INTEREST.—Qualified g u a r a n t e e d

interest (within the m e a n i n g of subsection (f))". (b) QUALIFIED GUARANTEED INTEREST D E F I N E D. — S e c t i o n 805 (relat-

ing to policy and other contract liability requirements) is amended by adding a t the end thereof the following new subsection: "(D

QUALIFIED

GUARANTEED

INTEREST

AND QUALIFIED

CON-

TRACTS.—For purposes of this section— "(1) IN GENERAL.—The term 'qualified g u a r a n t e e d interest' means any a m o u n t in the n a t u r e of interest for the taxable year on qualified contracts, b u t only if such a m o u n t is determined pursuant to— "(A) a stated rate of interest which is g u a r a n t e e d — "(i) before the beginning of the period for which the interest accrues, and "(ii) for a period of not less than 12 months (or for a period ending not earlier than the close of the taxable year in which the contract was issued), or "(B) a rate or rates of interest which— "(i) meet the requirements of clause (i) of subparagraph (A), and "(ii) is determined under a formula or other method the term s of which— "(I) during the period referred to in subparagraph (A)(ii) may not be changed by the taxpayer, and "(II) a r e independent of the experience of the taxpayer. "(2)

QUALIFIED

CONTRACT.—The

term

'qualified

contract'

means any a n n u i t y contract (other than any contract described in subsection (d)) which— "(A) involves (at the time the qualified interest is credited under the contract) life contingencies, "(B) provides no right under State law for the policyholder to participate in the divisible surplus of the taxpayer, and "(C) provides that the tax p a y e r may from time to time credit a m o u n t s in the n a t u r e of interest in excess of a m o u n t s computed on the basis of any rate or rates g u a r a n teed in the contract at the time it was entered into. "(8) SPECIAL RULE I-^OR PARTICIPATING CONTRACTS.—

"(A) IN GENERAL.—In the case of an a n n u i t y contract which is not a qualified contract solely because it fails to satisfy the requirements of subparagraph (B) of paragraph (2), such contract shall be treated as a qualified contract and the a m o u n t taken into account as qualified g u a r a n t e e d interest with respect to such contract shall be equal to the sum of—

26 USC 805.

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 96 STAT. 544

PUBLIC LAW 97-248—SEPT. 3, 1982 "(i) the a m o u n t of interest which would be assumed in calculating reserves with respect to such contract under section 810(c) if such interest were not t a k e n into account under subsection (e), plus "(ii) 92.5 percent of the excess of— "(I) the a m o u n t of qualified g u a r a n t e e d interest (determined without regard to this paragraph and as if such contract were a qualified contract), over "(II) the a m o u n t determined under clause (i). "(B) INTEREST NOT OTHERWISE TAKEN INTO ACCOUNT.—No

deduction shall be allowed under any other provision of this part for the 7.5 percent of the excess described in subparagraph (A)(ii) which is not t r e a t e d as qualified g u a r a n t e e d interest." (c) CONFORMING AMENDMENTS. —

26 USC 805. 26 USC 809. Ante, p. 543.

Ante, p. 543.

26 USC 805 note.

(1) Subparagraph (A) of section 805(c)(1) (defining adjusted life insurance reserves) is amended by inserting "or reserves on any qualified contract" after "pension plan reserves". (2) Paragraph (2) of section 809(a) (defining required interest) is amended— (A) by inserting " the a m o u n t of qualified g u a r a n t e e d interest (within the m e a n i n g of section 805(D(1)) and " after " the sum o f; and (B) by adding at the end thereof the following new sentence: "For purposes of subparagraph s (A) and (B), reserves on qualified contracts (within the m e a n i n g of section 805(f)(2)) shall not be taken into account." (3) Paragraph (1) of section 809(e) (relating to modification of interest deduction) is amended by inserting "qualified g u a r a n teed interest (within the m e a n i n g of section 805(0(1) or" after "allowed for". (d) EFFECTIVE D A T E S. —

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 1981. (2) G U A R A N T E E S FOR LESS THAN 1 2 MONTHS.— (A) MONEYS HELD BEFORE AUGUST 14, 1982. — The require-

ments of subparagraph (A)(ii) or (B)(ii)(l) of section 805(f)(1) of the I n t e r n a l Revenue Code of 1954 (as added by subsection (b)) shall not apply to any moneys held under any contract on August 13, 1982 (and any interest on such moneys after such date). (B) CONTRACTS ENTERED INTO AFTER AUGUST 13, 1982, AND

BEFORE JANUARY 1, 1983.—A Contract entered into after August 13, 1982, and before January 1, 1983, shall be treated as meeting the requirements of subparagraph (A)(ii) or (B)(ii)(I) of such Code if it meets such requirements on the first contract a n n i v e r s a r y date.

26 USC 72.

SKC. 2fi.->. TRKATMKNT OF A.MO I NTS RK( KIVKI) INDKR ANM ITY CONTRACTS BKFORK ANNIITY STARTIN(I)ATK. (a) IN GENERAL.—Subsection (e) of section 72 (relating to a m o u n t s not received as annuities) is amended to read as follows: "(e) A M O U N T S N O T RECEIVED AS A N N U I T I E S. — "(1) APPLICATION OF SUBSECTION.—

"(A) IN GENERAL.—This subsection shall apply to any a m o u n t which—

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96 STAT. 545

"(i) is received under a n a n n u i t y, endowment, or life insurance contract, and "(ii) is not received as a n a n n u i t y, if no provision of this subtitle (other than this subsection) applies with respect to such a m o u n t. "(B) DIVIDENDS.—For purposes of this section, any a m o u n t received which is in the n a t u r e of a dividend or similar distribution shall be treated as a n a m o u n t not received as a n a n n u i t y. "(2) GENERAL RULE.—Any a m o u n t to which this subsection applies— "(A) if received on or after the a n n u i t y s t a r t i n g date, shall be included in gross income, or "(B) if received before the a n n u i t y s t a r t i n g date— "(i) shall be included in gross income to the extent allocable to income on the contract, and "(ii) shall not be included in gross income to the extent allocable to the investment in the contract. "(3) ALLOCATION OF AMOUNTS TO INCOME AND INVESTMENT.—

For purposes of paragraph (2)(B)— "(A) ALLOCATION TO INCOME.—Any a m o u n t to which this subsection applies shall be t r e a t e d as allocable to income on the contract to the extent that such a m o u n t does not exceed the excess (if any) of— "(i) the cash value of the contract (determined without regard to any s u r r e n d e r charge) immediately before the a m o u n t is received, over "(ii) the investment in the contract a t such time. "(B) ALLOCATION TO INVESTMENT. — Any a m o u n t to which

this subsection applies shall be t r e a t e d as allocable to investment in the contract to the extent that such a m o u n t is not allocated to income under subparagraph (A). "(4) SPECIAL RULES FOR APPLICATION O F PARAGRAPH (2)(B). —

For purposes of paragraph (2)(B)— "(A) L O A N S TREATED AS DISTRIBUTIONS.—If, during

any

taxable year, a n individual— "(i) receives (directly or indirectly) any a m o u n t as a loan under any contract to which this subsection applies, or "(ii) assigns or pledges (or agrees to assign or pledge) any portion of the value of any such contract, such a m o u n t or portion shall be t r e a t e d as received under the contract as a n a m o u n t not received as a n a n n u i t y. "(B)

TREATMENT

OF

POLICYHOLDER

DIVIDENDS.—Any

a m o u n t described in paragraph (1)(B) shall not be included in gross income under paragraph (2)(B)(i) to the extent such a m o u n t is retained by the i n s u r e r as a p r e m i u m or other consideration paid for the contract. "(5) R E T E N T I O N OF EXISTING RULES IN CERTAIN CASES.—

"(A) IN GENERAL.—In any case to which this paragraph applies— "(i) paragraph s (2)(B) and (4)(A) shall not apply, and "(ii) if paragraph (2)(A) does not apply, the a m o u n t shall be included in gross income, b u t only to the extent it exceeds the investment in the contract. "(B) EXISTING CONTRACTS.—This paragraph shall apply to contracts entered into before August 14, 1982. Any a m o u n t

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 96 STAT. 546

PUBLIC LAW 97-248—SEPT. 3, 1982 allocable to investment in the contract after August 13, 1982, shall be t r e a t e d a s from a contract entered into after such date. "(C)

CERTAIN

LIFE

INSURANCE A N D ENDOWMENT CON-

TRACTS.—Except to the extent prescribed by the Secretary by regulations, this paragraph shall apply to any a m o u n t not received as a n a n n u i t y which is received under a life insurance or endowment contract. "(D)

CONTRACTS UNDER

QUALIFIED PLANS.—This

para-

g r a p h shall apply to any a m o u n t received— "(i) from a t r u s t described in section 401(a) which is exempt from tax under section 501(a), "(ii) from a contract— "(I) purchased by a t r u s t described in clause (i), "(II) purchased as part of a plan described in section 403(a), "(III) described in section 403(b), or "(IV) provided for employees of a life insurance company under a plan described in section 805(d)(3), or "(iii) from a n individual retirement account or a n individual retirement a n n u i t y. "(E)

FULL

REFUNDS,

SURRENDERS,

REDEMPTIONS, AND

MATURITIES.—This paragraph shall apply to— "(i) any a m o u n t received, w h e the r in a single sum or otherwise, under a contract in full discharge of the obligation under the contract which is in the n a t u r e of a refund of the consideration paid for the contract, and "(ii) any a m o u n t received under a contract on its complete s u r r e n d e r, redemption, or m a t u r i t y. In the case of any a m o u n t to which the preceding sentence applies, the rule of paragraph (2)(A) shall not apply. "(6) INVESTMENT I N THE CONTRACT.—For purposes of t h i s sub-

section, the investment in the contract as of any date is— "(A) the aggregate a m o u n t of p r e m i u m s or other consideration paid for the contract before such date, m i n u s "(B) the aggregate a m o u n t received under the contract before such date, to the extent that such a m o u n t was excludable from gross income under this subtitle or prior income tax laws." (b) 5-PERCENT PENALTY FOR CERTAIN P R E M A T U R E DISTRIBUTIONS.—

95 Stat. 278.

(1) IN GENERAL.—Section 72 (relating to annuities; certain proceeds of endowment and life insurance contracts) is amended by redesignating subsection (q) as subsection (r) and by adding after subsection (p) the following new subsection: "(q) 5 - P E R C E N T P E N A L T Y FOR P R E M A T U R E DISTRIBUTIONS F R O M A N N U I T Y CONTRACTS.— "(1) IMPOSITION OF PENALTY.—

"(A) IN GENERAL.—If any tax p a y e r receives any a m o u n t under a n a n n u i t y contract, the taxpayer's tax under this chapter for the taxable year in which such a m o u n t is received shall be increased by a n a m o u n t equal to 5 percent of the portion of such a m o u n t includible in gross income which is properly allocable to any investment in the annuity contract made during the 10-year period ending on the date such a m o u n t was received by the taxpayer.

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 PUBLIC LAW 97-248—SEPT. 3, 1982 "(B) ALLOCATION ON FIRST-IN, FIRST-OUT BASIS.—For pur-

poses of subparagraph (A), the a m o u n t includible in gross income shall be allocated to the earliest investment in the contract with respect to which a m o u n t s have not been previously fully allocated under this paragraph. "(2) SUBSECTION NOT TO APPLY TO CERTAIN DISTRIBUTIONS.—

This subsection shall not apply to any distribution— "(A) m a d e on or after the date on which the tax p a y e r a t t a i n s age 59 Vz, "(B) m a d e to a beneficiary (or to the estate of a n a n n u itant) on or after the death of a n a n n u i t a n t, "(C) a t t r i b u t a b l e to the tax p a y e r ' s becoming disabled within the m e a n i n g of subsection (m)(7), "(D) which is one of a series of substantially equal periodic payments m a d e for the life of a tax p a y e r or over a period extending for a t least 60 months after the a n n u i t y s t a r t i n g date, "(E) from a plan, contract, account, trust, or a n n u i t y described in subsection (e)(5)(D), or "(F) allocable to investment in the contract before August 14, 1982." (2) CONFORMING AMENDMENTS. —

(A) Each of the following provisions a r e amended by inserting "section 72(q)(l) (relating to 5-percent tax on prem a t u r e distributions under a n n u i t y contracts)," after "owner-employees)": (i) Section 46(a)(4), (ii) Section 50A(a)(3), (iii) Section 53(a), (iv) Section 901(a). (B) Subparagraph (A) of section 1302(a)(2) is amended by inserting "or (q)(l)" after "section 72(m)(5)". (C) Paragraph (1) of section 1304(e) is amended— (i) by inserting " o r section 72(q)(l) (relating to 5-percent tax on p r e m a t u r e distributions under a n n u i t y contracts)" after "owner-employees)", and (ii) by inserting "or (q)(l)'^ after "Section 72(m)(5)" in the heading thereof, (c) EFFECTIVE D A T E S. —

(1) shall (2) shall

Ante, p. 546. 26 USC 46. 26 USC 50A. 26 USC 53. 26 USC 901. 26 USC 1302. 26 USC 1304. p

26 USC 72 note.

SUBSECTION (a).—The amendments m a d e by subsection (a) t a k e effect on August 13, 1982. SUBSECTION (b).—The amendments m a d e by subsection (b) apply to distributions after December 31, 1982.

SEC. 266. FLEXIBLE PREMIUM CONTRACTS. (a) IN GENERAL.—Section 101 (relating to exclusion from gross 26 USC lOi. income for certain death benefits) is amended by adding a t the e n d thereof the following new subsection: "(f) PROCEEDS O F FLEXIBLE P R E M I U M REASON OF D E A T H. —

CONTRACTS PAYABLE BY

"(1) IN GENERAL.—Any a m o u n t paid by reason of the death of the insured under a flexible p r e m i u m life insurance contract shall be excluded from gross income only if— "(A) under such contract— "(i) the s u m of the p r e m i u m s paid under such contract does not a t any time exceed the guideline prem i u m limitation as of such time, and

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 96 STAT. 548

PUBLIC LAW 97-248—SEPT. 3, 1982 "(ii) any a m o u n t payable by reason of the death of the insured (determined without regard to any qualified additional benefit) is not a t any time less than the applicable percentage of the cash value of such contract at such time, or "(B) by the term s of such contract, the cash value of such contract may not a t any time exceed the n e t single p r e m i u m with respect to the a m o u n t payable by reason of the death of the insured (determined without regard to any qualified additional benefit) a t such time. "(2) G U I D E L I N E PREMIUM LIMITATION.—For purposes of t h i s

subsection— "(A) G U I D E L I N E PREMIUM LIMITATION.—The term

'guide-

line p r e m i u m limitation' means, as of any date, the g r e a t e r of— "(i) the guideline single p r e m i u m, or "(ii) the sum of the guideline level p r e m i u m s to such date. "(B) G U I D E L I N E SINGLE P R E M I U M. — The term

'guideline

single p r e m i u m ' means the p r e m i u m a t issue with respect to future benefits under the contract (without regard to any qualified additional benefit), and with respect to any charges for qualified additional benefits, a t the time of a determination under subparagraph (A) or (E) and which is based on— "(i) the mortality and other charges g u a r a n t e e d under the contract, and "(ii) interest at the g r e a t e r of an annual effective r a t e of 6 percent or the minimum r a t e or rates g u a r a n t e e d upon issue of the contract. "(C) G U I D E L I N E LEVEL P R E M I U M. — The

f

term

'guideline

level p r e m i u m ' means the level annual a m o u n t, payable over the longest period permitted under the contract (but ending not less than 20 years from date of issue or not later than age 95, if earlier), computed on the same basis as the guideline single premium, except that subparagraph (B)(ii) shall be applied by substituting '4 percent' for '6 percent'. "(D) COMPUTATIONAL RULES.—In c o m p u t i n g the guideline

single p r e m i u m or guideline level p r e m i u m under subparagraph (B) or (O— "(i) the excess of the a m o u n t payable by reason of the death of the insured (determined without regard to any qualified additional benefit) over the cash value of the contract shall be deemed to be not g r e a t e r than such excess at the time the contract was issued, "(ii) the m a t u r i t y date shall be the latest m a t u r i t y date permitted under the contract, but not less than 20 years after the date of issue or (if earlier) age 95, and "(iii) the a m o u n t of any endowment benefit (or s u m of endowment benefits) shall be deemed not to exceed the least a m o u n t payable by reason of the death of the insured (determined without regard to any qualified additional benefit) a t any time under the contract. "(E) ADJUSTMENTS.—The guideline single p r e m i u m and guideline level p r e m i u m shall be adjusted in the event of a change in the future benefits or any qualified additional benefit under the contract which was not reflected in any

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 549

guideline single p r e m i u m s or guideline level p r e m i u m previously determined. "(3) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of

this subsection— "(A) FLEXIBLE PREMIUM LIFE INSURANCE CONTRACT.—The

term s 'flexible p r e m i u m life insurance contract' and 'contract' mean a life insurance contract (including any qualified additional benefits) which provides for the payment of one or more p r e m i u m s which a r e not fixed by the insurer as to both timing and a m o u n t. Such term s do not include that portion of any contract which is treated under State law a s providing any a n n u i t y benefits other than as a settlement option. "(B) PREMIUMS PAID.—The term ' p r e m i u m s paid' means the p r e m i u m s paid under the contract less any a m o u n t s (other than a m o u n t s includible in gross income) to which section 72(e) applies. If, in order to comply with the requirements of paragraph (1)(A), any portion of any p r e m i u m paid during any contract year is r e t u r n e d by the insurance company (with interest) within 60 days after the end of a contract year— "(i) the a m o u n t so r e t u r n e d (excluding interest) shall be deemed to reduce the s u m of the p r e m i u m s paid under the contract during such year, and "(ii) notwithstanding the provisions of section 72(e), the a m o u n t of any interest so r e t u r n e d shall be includible in the gross income of the recipient. "(C) APPLICABLE PERCENTAGE.—The term 'applicable per-

centage' means— "(i) 140 percent in the case of a n insured with a n a t t a i n e d age a t the beginning of the contract year of 40 or less, and "(ii) in the case of a n insured with a n a t t a i n e d age of more than 40 as of the beginning of the contract year, 140 percent reduced (but not below 105 percent) by one percent for each year in excess of 40. "(D) CASH VALUE.—The cash value of any contract shall be determined without regard to any deduction for any s u r r e n d e r charge or policy loan. "(E) QUALIFIED ADDITIONAL BENEFITS.—The term

'quali-

fied additional benefits' means any— "(i) g u a r a n t e e d insurability, "(ii) accidental death benefit, "(iii) family term coverage, or "(iv) waiver of p r e m i u m. "(F) P R E M I U M PAYMENTS NOT DISQUALIFYING CONTRACT.—

The payment of a p r e m i u m which would result in the s u m of the p r e m i u m s paid exceeding the guideline p r e m i u m limitation shall be disregarded for purposes of paragraph (l)(A)(i) if the a m o u n t of such p r e m i u m does not exceed the a m o u n t necessary to prevent the termination of the contract without cash value on or before the end of the contract year. "(G) N E T SINGLE P R E M I U M. — I n c o m p u t i n g the n e t single

p r e m i u m under paragraph (1)(B)— "(i) the mortality basis shall be that g u a r a n t e e d under the contract (determined by reference to the

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 96 STAT. 550

PUBLIC LAW 97-248—SEPT. 3, 1982 most recent mortality table allowed under all State laws on the date of issuance), "(ii) interest shall be based on the greater of— "(I) an annual effective rate of 4 percent (3 percent for contracts issued before July 1, 1983), or "(ID the minimum rate or rates guaranteed upon issue of the contract, and "(iii) the computational rules of paragraph (2)(D) shall apply, except that the maturity date referred to in clause (ii) thereof shall not be earlier than age 95. "(H) CORRECTION OF ERRORS.—If the taxpayer establishes

26 USC 101.

26 USC 101 note.

to the satisfaction of the Secretary that— "(i) the requirements described in paragraph (1) for any contract year was not satisfied due to reasonable error, and "(ii) reasonable steps are being taken to remedy the error, the Secretary may waive the failure to satisfy such requirements. "(I) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. ' (b) CONFORMING AMENDMENT.—Paragraph (1) of section 101(a) (relating to proceeds of life insurance contracts payable by reason of death) is amended by striking out "and in subsection (d)" and inserting in lieu thereof ", subsection (d), and subsection (f)". (c) EFFECTIVE D A T E S. —

(1) IN GENERAL.—The amendments made by this section shall apply to contracts entered into before January 1, 1984. (2) SPECIAL RULE FOR CONTRACTS ENTERED INTO BEFORE JANU-

Ante, p. 547.

ARY 1, 1983.—Any contract entered into before January 1, 1983, which meets the requirements of section 101(f) of the Internal Revenue Code of 1954 on the date which is 1 year after the date of the enactment of this Act shall be treated as meeting the requirements of such section for any period before the date on which such contract meets such requirements. Any death benefits paid under a flexible premium life insurance contract (within the meaning of section 101(f)(3)(A) of such Code) before the date which is 1 year after such date of enactment shall be excluded from gross income. (3) SPECIAL RULE FOR CERTAIN CONTRACTS.—Any contract

entered into before January 1, 1983, shall be treated as meeting the requirements of subparagraph (A) of section 101(f)(1) of such Code if such contract would meet such requirements if section 103(0(2)(C) of such Code were applied by substituting "3 percent" for "4 percent". SEC. 267. REDUCTION IN APPROXIMATE REVALUATION METHOD OF COMPUTING RESERVES.

(a) REDUCTION FROM $21 PER $1,000 TO $19 PER $1,000 IN DETERMINING APPROXIMATE REVALUATION OF CERTAIN RESERVES COMPUTED ON PRELIMINARY TERM BASIS.—

26 USC 818.

(1) IN GENERAL.—Subparagraph (A) of section 818(c)(2) (relating to approximate revaluation of reserves computed on preliminary term basis) is amended— (A) by striking out "$21" and inserting in lieu thereof "$19", and

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96 STAT. 551

(B) by striking out "2.1 percent" and inserting in lieu thereof "1.9 percent". (2) TAXPAYER ALLOWED TO ELECT OUT OF APPROXIMATE REVALU-

ATION.—The last sentence of section 818(c) (relating to life insurance reserves computed on preliminary term basis) is amended— (A) by inserting "or in effect for a taxable year beginning in 1981" after "1958" the first place it appears, and (B) by inserting "or 1981, whichever is applicable" after "1958" the second place it appears. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1981, but only with respect to reserves established under contracts entered into after March 31, 1982.

26 USC 818.

26 USC 818 note.

PART IV—UNDERPAYMENTS OF ESTIMATED TAX FOR 1982 SEC. 268. UNDERPAYMENTS OF ESTIMATED TAX FOR 1982.

26 USC 802 note.

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 income tax) for any period before December 15, 1982, with respect to any underpayment of estimated tax by a taxpayer with respect to any tax imposed by section 802(a), to the extent that such underpayment was created or increased by any provisions of this subtitle.

Subtitle E—Employment Taxes PART I—IN GENERAL SEC. 269. TREATMENT OF REAL ESTATE AGENTS AND DIRECT SELLERS.

(a) GENERAL RULE.—Chapter 25 of the Internal Revenue Code of 1954 is amended by adding at the end thereof the following new section: "SEC. 3508. TREATMENT OF REAL ESTATE AGENTS AND DIRECT SELLERS.

"(a) GENERAL RULE.—For purposes of this title, in the case of services performed as a qualified real estate agent or as a direct seller— "(1) the individual performing such services shall not be treated as an employee, and "(2) the person for whom such services are performed shall not be treated as an employer. "(b) DEFINITIONS.—For purposes of this section— "(1) QUALIFIED REAL ESTATE AGENT.—The term 'qualified real estate agent' means any individual who is a sales person if— "(A) such individual is a licensed real estate agent, "(B) substantially all of the remuneration (whether or not paid in cash) for the services performed by such individual as a real estate agent is directly related to sales or other output (including the performance of services) rather than to the number of hours worked, and "(C) the services performed by the individual are performed pursuant to a written contract between such individual and the person for whom the services are performed and such contract provides that the individual will not be

26 USC 3508.

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 96 STAT. 552

PUBLIC LAW 97-248—SEPT. 3, 1982 treated as an employee with respect to such services for Federal tax purposes. "(2) DIRECT SELLER.—The term 'direct seller' means any person if— "(A) such person— "(i) is engaged in the trade or business of selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis which the Secretary prescribes by regulations, for resale (by the buyer or any. other person) in the home or otherwise than in a permanent retail establishment, or "(ii) is engaged in the trade or business of selling (or soliciting the sale of) consumer products in the home or otherwise than in a permanent retail establishment, "(B) substantially all the remuneration (whether or not paid in cash) for the performance of the services described in subparagraph (A) is directly related to sales or other output (including the performance of services) rather than to the number of hours worked, and "(C) the services performed by the person are performed pursuant to a written contract between such person and the person for whom the services are performed and such contract provides that the person will not be treated as an employee with respect to such services for Federal tax purposes. "(3)

COORDINATION

WITH

RETIREMENT

PLANS

FOR SELF-

EMPLOYED.—This section shall not apply for purposes of subtitle A to the extent that the individual is treated as an employee under section 401(c)(1) (relating to self-employed individuals)." (b) AMENDMENT OF SOCIAL SECURITY ACT.—Section 210 of

42 USC 410.

the

Social Security Act is amended by adding at the end thereof the following new subsection: "Treatment of Real Estate Agents and Direct Sellers

Ante, p. 551.

26 USC 3401

"°*^26 USC 3401 "°*'®-

"(p) Notwithstanding any other provision of this title, the rules of section 3508 of the Internal Revenue Code of 1954 shall apply for purposes of this title." (c) INDEFINITE EXTENSION OF PROVISIONS RELATING TO EMPLOYMENT STATUS FOR EMPLOYMENT TAXES.— (1) TERMINATION O F CERTAIN EMPLOYMENT TAX LIABILITY.—

(A) Subparagraph (A) of section 530(a)(1) of the Revenue Act of 1978 (relating to termination of certain employment tax liability for periods before July 1, 1982) is amended by striking out "ending before July 1, 1982". (B) Paragraph (3) of section 530(a) of such Act is amended by striking out "and before July 1, 1982,". (C) The subsection heading of subsection (a) of section 530 of such Act is amended by striking out "FOR PERIODS BEFORE JULY 1, 1982". (2) PROHIBITION AGAINST REGULATIONS AND RULINGS ON EMPLOYMENT STATUS.—Subsection (b) of section 530 of such Act

is amended— (A) by striking out "July 1, 1982 (or, if earlier,", and (B) by striking out "taxes)" and inserting in lieu thereof "taxes.

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 553

(3) CERTAIN REGULATIONS, ETC., PERMITTED.—Nothing in sec-

26 USC 3508

tion 530 of the Revenue Act of 1978 shall be construed to prohibit the implementation of the amendments made by this section.

note. 26 USC 3401

(d) CLERICAL AMENDMENT. — The table of sections for chapter 25 of

such Code is amended by adding a t the end thereof the following new item: "Sec. 8.508. Treatment of real estate agents and direct sellers." (e) EFFECTIVE DATES.—

26 USC 3508

(1) IN GENERAL.—Except as provided in paragraph (2), the ^°^^amendments made by this section shall apply to services performed after December 31, 1982. (2) SUBSECTION ( O. — The amendments made by subsection (c) shall t a k e effect on July 1, 1982. SEC. 270. SIMPLIFIED PROCEDURE EMPLOYMENT TAXES.

FOR DETERMINING

AMOINT OF

(a) IN GENERAL.—Chapter 25 (relating to general provisions relating to employment taxes), as amended by section 271, is amended by adding at the end thereof the following new section: "SEC. 3.509. DETERMINATION OF EMPLOYERS LIABILITY FOR CERTAIN EMPLOYMENT TAXES.

"(a) IN GENERAL.—If any employer fails to deduct and withhold any tax under chapter 24 or subchapter A of chapter 21 with respect to any employee by reason of t r e a t i n g such employee as not being a n employee for purposes of such chapter or subchapter, the a m o u n t of the employer's liability for— "(1) WITHHOLDING TAXES.—Tax under chapter 24 for

26 USC 3509.

26 USC 3401 et ^^9. 3101.

such

year with respect to such employee shall be determined as if the a m o u n t required to be deducted and withheld were equal to 1.5 percent of the wages (as defined in section 3401) paid to such employee. "(2) EMPLOYEE SOCIAL SECURITY TAX.—Taxes under subchapter

A of chapter 21 with respect to such employee shall be determined as if the taxes imposed under such subchapter were 20 percent of the a m o u n t imposed under such subchapter without regard to this subparagraph. "(b) EMPLOYER'S LIABILITY INCREASED W H E R E EMPLOYER GARDS REPORTING REQUIREMENTS.—

DISRE-

"(1) IN GENERAL.—In the case of an employer who fails to meet the applicable requirements of section 6041(a), 6041A, or 6051 with respect to any employee, unless such failure is due to reasonable cause and not willful neglect, subsection (a) shall be applied with respect to such employee— "(A) by substituting '3 percent' for '1.5 percent' in paragraph (1); and "(B) by substituting '40 percent' for '20 percent' in paragraph (2). "(2) APPLICABLE REQUIREMENTS.—For purposes of paragraph

(1), the term 'applicable requirements ' means the requirements described in paragraph (1) which would be applicable consistent with the employer's t r e a t m e n t of the employee as not being a n employee for purposes of chapter 24 or subchapter A of chapter 21. "(c) SECTION N O T TO APPLY

IN CASES OF INTENTIONAL

DISRE-

GARD.—This section shall not apply to the determination of the

Pos^, p. 601.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/596

 96 STAT. 554 26 USC 3401 et seq, 3101.

PUBLIC LAW 97-248—SEPT. 3, 1982 employer's liability for tax under chapter 24 or subchapter A of chapter 21 if such liability is due to the employer's intentional disregard of the requirement to deduct and withhold such tax. "(d) SPECIAL RULES.—For purposes of this section— "(1) DETERMINATION OF LIABILITY.—If the amount of any liability for tax is determined under this section— "(A) the employee's liability for tax shall not be affected by the assessment or collection of the tax so determined, "(B) the employer shall not be entitled to recover from the employee any tax so determined, and "(C) sections 3402(d) and section 6521 shall not apply. "(2) SECTION NOT TO APPLY WHERE EMPLOYER DEDUCTS WAGE BUT NOT SOCIAL SECURITY TAXES.—This section shall not apply to

any employer with respect to any wages if— "(A) the employer deducted and withheld any amount of the tax imposed by chapter 24 on such wages, but "(B) failed to deduct and withhold the amount of the tax imposed by subchapter A of chapter 21 with respect to such wages. "(3) SECTION NOT TO APPLY TO CERTAIN STATUTORY EMPLOY-

EES.—This section shall not apply to any tax under subchapter A of chapter 21 with respect to an individual described in subsection (d)(3) of section 3121 (without regard to whether such individual is described in paragraph (1) or (2) of such subsection).", (b) CONFORMING AMENDMENT.—The table of sections for chapter 25 is amended by adding at the end thereof the following new item: "Sec. 3509. Determination of employer's liability for certain employment taxes."

26 USC 3509 "°*®-

(c) EFFECTIVE D A T E. — The amendment m a d e by this section shall take effect on the date of the enactment of this Act, except that such amendments shall not apply to any assessment made before January 1, 1983.

PART II—FEDERAL UNEMPLOYMENT TAX Subpart A—Increase in Federal Unemployment Tax SEC. 271. INCREASE IN FEDERAL UNEMPLOYMENT TAX WAGE BASE AND RATE.

26 USC 3306.

(a) INCREASE IN WAGE BASE.—Paragraph (1) of section 3306(b) (defining wages) is amended by striking out "$6,000" each place it appears and inserting in lieu thereof "$7,000". (b) INCREASE IN RATE.—

26 USC 3301.

(1) IN GENERAL.—Paragraph (1) of section 3301 (relating to rate of unemployment tax) is amended by striking out "3.4 percent" and inserting in lieu thereof "3.5 percent". (2) TECHNICAL AMENDMENTS.—

42 USC 1101.

26 USC 3301.

(A) Subparagraph (C) of section 901(c)(3) of the Social Security Act is amended to read as follows: "(C) Each estimate of net receipts under this paragraph shall be based upon (i) a tax rate of 0.5 percent in the case of any calendar year for which the rate of tax under section 3301 of the Federal Unemployment Tax Act is 3.2 percent, and (ii) a tax rate of 0.8 percent in the case of any calendar year for which the rate of tax under such section is 3.5 percent."

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Page:United States Statutes at Large Volume 96 Part 1.djvu/597

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 555

(B) Paragraph (1) of section 905(b) of such Act is amended 42 USC 1105. by amending the last sentence to read a s follows: " I n the case of any month after March 1983 and before April 1 of the first calendar year to which paragraph (2) of section 3301 of the Federal Unemployment Tax Act applies, the 26 USC 3301. first sentence of this paragraph shall be applied by substit u t i n g '40 percent' for 'one-tenth'." (C) Subsection (b) of section 6157 is amended by striking 26 USC 6157. out "0.7 p e r c e n t " and inserting in lieu thereof "0.8 percent". (c) INCREASE IN R A T E FOR 1985 AND THE R E A F T E R. —

(1) IN GENERAL.—Section 3301 (as amended by subsection (b)) is amended— (A) by striking o u t "3.5 p e r c e n t " and inserting in lieu thereof "6.2 percent", and (B) by striking o u t "3.2 p e r c e n t " and inserting in lieu thereof "6.0 percent". (2) INCREASE I N AMOUNT OF STATE CREDIT.—

(A) Subsection (b) of section 3302 (relating to additional 26 USC 3302. credit) is amended by striking^ out " 2. 7 % " and inserting in lieu thereof " 5. 4 % ". (B) Paragraph (1) of section 3302(d) (relating to r a t e of tax deemed to be 3 percent) is amended by striking out "3 percent" each place it a p p e a r s and inserting in lieu thereof "6 percent". (3) TECHNICAL AMENDMENTS. —

(A) Paragraph (2) of section 3302(c) is amended by striking out "10 percent" each place it a p p e a r s in subparagraph (A) and inserting in lieu thereof "5 percent". (B) Paragraph (3) of section 3302(c) is amended by striking out "15 p e r c e n t " and inserting in lieu thereof "IV2 percent". (C) Subsection (b) of section 6157 is amended by striking 26 USC 6157. out "0.5 p e r c e n t " each place it a p p e a r s and inserting in lieu thereof "0.6 percent". (D) Subparagraph (C) of section 901(c)(3) of the Social Security Act (as amended by subsection (b)) is amended— Ante, p. 554. (i) by striking out "0.5 p e r c e n t " and inserting in lieu thereof "0.6 percent"; (ii) by striking out "3.2 p e r c e n t " and inserting in lieu thereof "6.0 percent"; and (iii) by striking out "3.5 p e r c e n t " and inserting in lieu thereof "6.2 percent", (b) EFFECTIVE D A T E S. —

(1) SUBSECTIONS (a) AND (b).—The amendments m a d e by sub- 26 USC 3301 sections (a) and (b) shall apply to r e m u n e r a t i o n paid after ^°December 31, 1982. (2) SUBSECTION (C).—The amendments m a d e by subsection (c)

26 USC 3301

shall apply to r e m u n e r a t i o n paid after December 31, 1984. ^°^^(3) TRANSITIONAL RULE FOR CERTAIN EMPLOYEES.—

26 USC 3302

(A) IN GENERAL.—Notwithstanding section 3303 of the note. I n t e r n a l Revenue Code of 1954, in the case of taxable year s beginning after December 31, 1984, and before January 1, 1989, a tax p a y e r shall be allowed the additional credit under section 3302(b) of such Code with respect to any Supra. employee covered by a qualified specific industry provision

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Page:United States Statutes at Large Volume 96 Part 1.djvu/598

 96 STAT. 556

PUBLIC LAW 97-248—SEPT. 3, 1982 if the requirements of subparagraph (B) a r e met with respect to such employee. (B) REQUIREMENTS.—The requirements of this subparagraph a r e m e t for any taxable year with respect to any employee covered by a specific industry provision if the a m o u n t of contributions required to be paid for the taxable year to the unemployment fund of the State with respect to such employee a r e not less than the product of the required rate multiplied by the wages paid by the employer during the taxable year. (C) REQUIRED RATE.—For purposes of subparagraph (B),

the required rate for any taxable year is the s u m of— (i) the rate at which contributions were required to be made under the specific industry provision as in effect on August 10, 1982, and (ii) the applicable percentage of the excess of 5.4 percent over the r a t e described in clause (i). (D) APPLICABLE PERCENTAGE.—For purposes of s u b p a r a -

graph (C), the term "applicable percentage" means— (i) 20 percent in the case of taxable year 1985, (ii) 40 percent in the case of taxable year 1986, (iii) 60 percent in the case of taxable year 1987, and (iv) 80 percent in the case of taxable year 1988. (E) QUALIFIED SPECIFIC INDUSTRY PROVISION.—For

pur-

poses of this paragraph, the term, "qualified specific industry provision" means a provision contained in a State unemployment compensation law (as in effect on August 10, 1982)— (i) which applies to employees in a specific industry or to a n otherwise defined type of employees, and (ii) under which employers may elect to m a k e contributions a t a specified rate (without experience rating) which exceeds 2.7 percent. Subpart B—Other F i n a n c i n g Provisions SKC. 272. C R E D I T REDUCTION NOT TO A P P L Y WHEN STATE MAKES CERTAIN R E P A Y M E N T S.

95 Stat. 876.

(a) GENERAL RuLE.—Section 3302 (relating to credits against unemployment tax) is amended by adding at the end thereof the following new subsection: "(g) CREDIT REDUCTION N O T To APPLY W H E N STATE M A K E S CERTAIN REPAYMENTS.—

"(1) IN GENERAL.—In the case of any State which meets requirements of paragraph (2) with respect to any taxable year, subsection (c)(2) shall not apply to such taxable year; except that such taxable year (and January 1 of such taxable year) shall (except as provided in subsection (f)(3)) be taken into account for purposes of applying subsection (c)(2) to succeeding taxable years. "(2) REQUIREMENTS.—The requirements of this paragraph a r e met by any State with respect to any taxable year if the Secretary of Labor determines that— "(A) the r e payments during the 1-year period ending on November 9 of such taxable year made by such State of

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Page:United States Statutes at Large Volume 96 Part 1.djvu/599

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 557

advances under title XII of the Social Security Act are not 42 USC 1321. less than the sum of— "(i) the potential additional taxes for such taxable year, and (ii) any advances made to such State during such 1-year period under such title XII, "(B) there will be sufficient amounts in the State unemployment fund to pay all compensation during the 3-month period beginning on November 1 of such taxable year without receiving any advance under title XII of the Social Security Act, and "(C) there is a net increase in the solvency of the State unemployment compensation system for the taxable year attributable to changes made in the State law after the date on which the first advance taken into account in determining the amount of the potential additional taxes was made (or, if later, after the date of the enactment of this subsection) and such net increase equals or exceeds the potential additional taxes for such taxable year. "(3) DEFINITIONS.—For purposes of paragraph (2)— "(A) POTENTIAL ADDITIONAL TAXES.—The term 'potential additional taxes' means, with respect to any State for any taxable year, the aggregate amount of the additional tax which would be payable under this chapter for such taxable year by all taxpayers subject to the unemployment compensation law of such State for such taxable year if paragraph (2) of subsection (c) had applied to such taxable year and any preceding taxable year without regard to this subsection but with regard to subsection (f). "(B) TREATMENT OF CERTAIN REDUCTIONS.—Any reduction

in the State's balance under section 901(d)(1) of the Social Security Act shall not be treated as a repayment made by 42 USC 1101. such State. "(4) REPORTS.—The Secretary of Labor may require a State to furnish such information at such time and in such manner as may be necessary for purposes of paragraph (2)." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 3302 shall apply to taxable years beginning after December 31, 1982. ^°^SEC. 273. LIMITATION ON FIFTH YEAR CREDIT REDUCTION.

(a) GENERAL RULE.—Paragraph (2) of section 3302(c) (relating to 26 USC 3302. limit on total credits) is amended by adding at the end thereof the following new sentence: "Subparagraph (C) shall not apply with respect to any taxable year to which it would otherwise apply (but subparagraph (B) shall apply to such taxable year) if the Secretary of Labor determines (on or before November 10 of such taxable year) that the State meets the requirements of subsection (f)(2)(B) for such taxable year." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 3302 shall apply to taxable years beginning after December 31, 1982. "°*®SEC. 274. DEFERRAL OF INTEREST IN CASE OF CERTAIN STATES WITH HIGH UNEMPLOYMENT RATES.

(a) GENERAL RULE.—Paragraph (3) of section 1202(b) of the Social Security Act is amended by adding at the end thereof the following 95 Stat. 879. new subparagraph: '^2 USC 1322.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/600

 96 STAT. 558

26 USC 3304 "°t^42 USC 1322 ^°^-

42 USC 1105.

PUBLIC LAW 97-248—SEPT. 3, 1982 "(C)(i) In the case of any State which meets the requirements of clause (ii) for any calendar year, any interest otherwise required to be paid under this subsection during such calendar year shall be paid as follows— "(I) 25 percent of the amount otherwise required to be paid on or before any day during such calendar year shall be paid on or before such day; and "(II) 25 percent of the amount otherwise required to be paid on or before such day shall be paid on or before the corresponding day in each of the 3 succeeding calendar years. Any interest the time for payment of which is deferred under this subparagraph shall bear interest in the same manner as if it were an advance made on the day on which it would have been required to be paid but for this subparagraph. "(ii) A State meets the requirements of this clause for any calendar year if the rate of insured unemployment (as determined for purposes of section 203 of the Federal-State Extended Unemployment Compensation Act of 1970) under the State law of the period consisting of the first 6 months of the preceding calendar year equaled or exceeded 7.5 percent." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to interest required to be paid after December 31, 1982. SEC. 275. REQUIRED REPAYMENTS FROM EXTENDED UNEMPLOYMENT COMPENSATION ACCOUNT. Subsection (d) of section 905 of the Social Security Act is amended by inserting after the second sentence the following new sentence: "Repayments under the preceding sentence shall be made whenever the Secretary of the Treasury (after consultation with the Secretary of Labor) determines that the amount then in the account exceeds the amount necessary to meet the anticipated payments from the account during the next 3 months." SEC. 276. TREATMENT OF CERTAIN SERVICES PERFORMED BY STUDENTS. (a) STUDENT INTERNS.—

26 USC 3306. 26 USC 3306 note.

(1) IN GENERAL.—Subparagraph (C) of section 3306(c)(10) (defining employment) is amended by striking out "under the age of 22". (2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply with respect to services performed after the date of the enactment of this Act. (b) FULL TIME STUDENTS EMPLOYED BY SUMMER CAMPS.— (1) SERVICE BY FULL TIME STUDENTS.—Subsection (c) of section

26 USC 3306.

3306 (defining employment) is amended— (A) by striking out "or" at the end of paragraph (18), (B) by striking out the period at the end of paragraph (19) and inserting in lieu thereof "; or", and (C) by adding at the end thereof the following new paragraph: "(20) service performed by a full time student (as defined in subsection (q)) in the employ of an organized camp— "(A) if such camp— "(i) did not operate for more than 7 months in the calendar year and did not operate for more than 7 months in the preceding calendar year, or "(ii) had average gross receipts for any 6 months in the preceding calendar year which were not more than

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Page:United States Statutes at Large Volume 96 Part 1.djvu/601

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 559

33 V percent of its average gross receipts for the b other 6 months in the preceding c a l e n d a r year; and "(B) if such full time s t u d e n t performed services in the employ of such c a m p for less than 13 calendar weeks in such c a l e n d a r year." (2) F U L L TIME STUDENT DEFINED.—Section 3306 is amended by

26 USC 3306.

adding a t the end thereof the following new subsection: "(q) F U L L T I M E S T U D E N T. — For purposes of subsection (c)(20), a n

individual shall be t r e a t e d as a full time s t u d e n t for any period— "(1) during which the individual is enrolled as a full time s t u d e n t a t a n educational institution, or "(2) which is between academic years or term s if— "(A) the individual w a s enrolled as a full time s t u d e n t a t an educational institution for the immediately preceding academic year or term, and "(B) the r e is a reasonable a s s u r a n c e that the individual will be so enrolled for the immediately succeeding academic year or term after the period described in subparagraph (A)." (3) EFFECTIVE DATE.—The amendments m a d e by this subsec- 26 USC 3306 tion shall apply to r e m u n e r a t i o n paid after December 31, 1982, '^°^^and before January 1, 1984. SEC. 277. TREATMENT OF CERTAIN ALIEN FARM WORKERS.

Subparagraph (B) of section 3306(c)(1) (defining employment) is 26 USC 3306. amended by striking out " January 1, 1982" and inserting in lieu thereof " January 1, 1984". PART III—MEDICARE COVERAGE SEC. 278. MEDICARE COVERAGE OF. AND APPLICATION OF HOSPITAL INSURANCE TAX TO, FEDERAL EMPLOYMENT. (a) APPLICATION EMPLOYMENT.—

OF HOSPITAL

INSURANCE

T A X TO

FEDERAL

(1) IN GENERAL.—Section 3121 (relating to definitions for pur- 26 USC 3121. poses of the Federal Insurance Contributions Act) is amended by adding a t the e n d thereof the following new subsection: "(u) APPLICATION EMPLOYMENT.—

OF HOSPITAL

INSURANCE

T A X TO FEDERAL

"(1) IN GENERAL.—For purposes of the taxes imposed by sections 3101(b) and 3111(b)— "(A) paragraph (6) of subsection (b) shall be applied without regard to subparagraph s (A), (B), and (C)(i), (ii), and (vi) thereof, and "(B) paragraph (5) of subsection (b) (and the provisions of law referred to therein) shall not apply. "(2) MEDICARE

QUALIFIED

FEDERAL EMPLOYMENT.—For

pur-

poses of this chapter, the term 'medicare qualified Federal employment ' means service which— "(A) is employment (as defined in subsection (b)) with the application of paragraph (1), b u t "(B) would not be employment (as so defined) without the application of paragraph (1)." (2) CONFORMING AMENDMENT TO SELF-EMPLOYMENT TAX.—Sec-

tion 1402(b) (relating to self-employment income) is amended in 26 USC 1402. the second sentence by striking out " and " before "(B)" and by inserting before the period the following: ", and (C) includes, b u t

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text: The Liberty to Trade as Buttressed by National Law/Intent


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Page:United States Statutes at Large Volume 96 Part 1.djvu/602

 96 STAT. 560

Ante, p. 559.

PUBLIC LAW 97-248—SEPT. 3, 1982 only with respect to the tax imposed by section 1401(b), remun e r a t i o n paid for m e d i c a r e qualified Federal employment (as defined in section 3121(u)(2)) which is subject to the taxes imposed by sections 3101(b) and 3111(b)". (3) CONFORMING

AMENDMENT TO FEDERAL SERVICE.—Section

3122 (relating to federal service) is amended in the first sentence by inserting "including service which is medicare qualified Federal employment (as defined in section 3121(u)(2))," after "wholly owned by the United States,", (b) ENTITLEMENT TO HOSPITAL INSURANCE B E N E F I T S. — (1) DEFINITION OF MEDICARE QUALIFIED FEDERAL

42 USC 410.

EMPLOY-

MENT.—Section 210 of the Social Security Act is amended by adding a t the end thereof the following new subsection: "Medicare Qualified Federal Employment

42 USC 426, ^^^~^-

"(p) For purposes of sections 226 and 226A, the term 'medicare qualified Federal employment ' means any service which would constitute ' employment ' as defined in subsection (a) of this section but for the application of the provisions of— "(1) subparagraph (A), (B), or (C)(i), (ii), or (vi) of subsection (a)(6), or "(2) subsection (a)(5).". (2) ENTITLEMENT TO HOSPITAL INSURANCE BENEFITS.—

(A) FOR INDIVIDUALS AGE 65 OR OLDER.—Section 226(a)(2)

42 USC 426.

Supra. 42 USC 1395c.

of the the Social Security Act is amended— (i) by inserting "(A)" after "(2)"; (ii) by striking out "or is a qualified railroad retirement beneficiary," at the end of subparagraph (A); and (iii) by inserting after subparagraph (A) the following new subparagraph s: "(B) is a qualified railroad retirement beneficiary, or "(C)(i) would meet the requirements of subparagraph (A) upon filing application for the monthly insurance benefits involved if medicare qualified Federal employment (as defined in section 210(p)) were t r e a t e d as employment (as defined in section 210(a)) for purposes of this title, and (ii) files an application, in conformity with regulations of the Secretary, for hospital insurance benefits under part A of title XVIII,". (B) ENTITLEMENT FOR DISABLED INDIVIDUALS.—

45 USC 231f.

(i) IN GENERAL.—Section 226(b)(2) of the Social Security Act is amended by striking out "(B)" and all that follows through "1974," and adding at the end the following: "(B) is, and has been for not less than 24 months, a disabled qualified railroad retirement beneficiary, within the m e a n i n g of section 7(d) of the Railroad Retirement Act of 1974, or "(C)(i) has filed an application, in conformity with regulations of the Secretary, for hospital insurance benefits under part A of title XVIII pursuant to this subparagraph, and "(ii) would meet the requirements of subparagraph (A) (as determined under the disability criteria, including reviews, applied under this title), including the requirement that he has been entitled to the specified benefits for 24 months, if— "(I) medicare qualified Federal employment (as defined in section 210(p)) were treated as employment (as defined in section 210(a)) for purposes of this title, and

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 561

"(II) the filing of the application under clause (i) of this subparagraph were deemed to be the filing of an application for the disability-related benefits referred to in clause (i), (ii), or (iii) of subparagraph (A),". (ii) CLARIFICATION OF PERIOD OF ENTITLEMENT.—Sec-

tion 226(b) of such Act is further amended by adding 42 USC 426. after the first sentence the following new sentence: "In applying the previous sentence in the case of an individual described in paragraph (2)(C), the 'twenty-fifth month of his entitlement ' refers to the first month after the twenty-fourth month of entitlement to specified benefits referred to in paragraph (2)(C) and 'notice of termination of such entitlement ' refers to a notice that the individual would no longer be determined to be entitled to such specified benefits under the conditions described in that paragraph. ". (C) ENTITLEMENT FOR INDIVIDUALS WITH END-STAGE RENAL

DISEASE.—Paragraph (1) of section 226A(a) of the Social Security Act is amended to read as follows: 42 USC 426-1. "(1)(A) is fully or c u r r e n t l y insured (as such term s a r e defined in section 214), or would be fully or c u r r e n t l y insured if (i) his service as an employee (as defined in the Railroad Retirement Act of 1974) after December 31, 1936, were included within the 45 USC 231t. m e a n i n g of the term 'employment' for purposes of this title, and (ii) his medicare qualified Federal employment (as defined in section 210(p)) were included within the m e a n i n g of the term Ante, p. 560. 'employment' for purposes of this title; "(B)(i) is entitled to monthly insurance benefits under this title, (ii) is entitled to an a n n u i t y under the Railroad Retirement Act of 1974, or (iii) would be entitled to a monthly insurance benefit under this title if medicare qualified Federal employment (as defined in 210(p)) after December 31, 1982, were included within the m e a n i n g of the term 'employment' for purposes of this title; or "(C) is the spouse or dependent child (as defined in regulations) of an individual described in subparagraph (A) or (B);". (3)

CONFORMING AMENDMENT.—Section

1811

of

the

Social

Security Act is amended— 42 USC 1395c. (A) by inserting "(or would be eligible for such benefits if certain Federal employment were covered employment under such title)" after "title II of this Act" in clause (1), and (B) by inserting "(or would have been so entitled to such benefits if certain Federal employment were covered employment under such title)" after "title II of this Act" in clause (2). (4) N O T I C E TO INDIVIDUALS W H O ARE PROSPECTIVE MEDICARE BENEFICIARIES BASED ON FEDERAL EMPLOYMENT.—Section 226 of

such Act is amended by redesignating subsection (g) as subsec- 42 USC 426. tion (h) and by inserting after subsection (f) the following new subsection: "(g) The Secretary and Director of the Office of Personnel Mana g e m e n t shall jointly prescribe and carry out procedures designed to assure that all individuals who perform medicare qualified Federal employment a r e fully informed with respect to (1) their eligibility or potential eligibility for hospital insurance benefits (based on such employment) under part A of title XVIII, (2) the requirements for 42 USC 1395c.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/604

 96 STAT. 562

5 USC 8301 et seq.

26 USC 3121 note. 42 USC 426 note.

42 USC 1395c.

42 USC 426 note. 42 USC 426, 426-1, 1395c.

Ante, pp. 560, 561.

42 USC 401.

42 USC 402. 42 USC 423.

PUBLIC LAW 97-248—SEPT. 3, 1982 and conditions of such eligibility, and (3) the necessity of timely application as a condition of entitlement under subsection (b)(2)(C), giving particular attention to individuals who apply for an annuity under chapter 83 of title 5, United States Code, or under another similar Federal retirement program, and whose eligibility for such an annuity is or would be based on a disability.". (c) EFFECTIVE DATES.— (1) HOSPITAL INSURANCE TAXES.—The

amendments made by subsection (a) shall apply to remuneration paid after December 31, 1982. (2) MEDICARE COVERAGE.—

(A) IN GENERAL.—The amendments made by subsection (b) are effective on and after January 1, 1983, and the amendments made by paragraph (3) of that subsection apply to remuneration (for medicare qualified Federal employment) paid after December 31, 1982. (B) TREATMENT OF CURRENT DISABILITIES.—For purposes of establishing entitlement to hospital insurance benefits under part A of title XVIII of the Social Security Act pursuant to the amendments made by subsection (b) or the provisions of subsection (d), no individual may be considered to be under a disability for any period before January 1, 1983. (d) TRANSITIONAL PROVISIONS.—

(1) IN GENERAL.—For purposes of sections 226, 226A, and 1811 of the Social Security Act, in the case of any individual— (A) who performs service both during January 1983, and before January 1, 1983, which constitutes medicare qualified Federal employment (as defined in section 210(p) of such Act) and (B) who would be entitled, under section 226(a)(2)(C), 226(b)(2)(C), 226A(a)(l)(A)(ii), or 226A(a)(l)(B)(iii) of such Act, to hospital insurance benefits under part A of title XVIII of such Act but for the failure to include medicare qualified Federal employment (as so defined) within the meaning of the term "employment" for purposes of title II of such Act for remuneration paid before January 1, 1983, the individual's medicare qualified Federal employment (as so defined) performed before January 1, 1983, for which remuneration was paid before such date, shall be considered to be "employment" (as so defined), but only for the purpose of providing such entitlement. (2) ELIGIBILITY OF OTHER PERSONS.—Any individual who is entitled to hospital insurance benefits under part A of title XVIII of the Social Security Act by reason of the application of paragraph (1) of this subsection, shall be deemed to be entitled to an old-age benefit under section 202 of such Act, or a disability benefit under section 223 of such Act, for purposes of determining eligibility for such hospital insurance benefits for any other person. In applying this paragraph, any such other person who would be entitled to a monthly benefit under section 202 of such Act if such individual (to whom paragraph (1) applies) were entitled to such old-age or disability benefit, shall be deemed to be entitled to such monthly benefit, but only for purposes of determining such person's eligibility for hospital insurance benefits.

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 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 563

(3) APPROPRIATIONS.—There a r e authorized to be a p p r o p r i a t e d to the Federal Hospital Insurance T r u s t F u n d from time to t i m e such s u m s as the Secretary of Health and Human Services deems necessary for any fiscal year, on account of— (A) payments m a d e or to be m a d e during such fiscal year from such T r u s t F u n d with respect to individuals who a r e entitled to benefits under title XVIII of the Social Security Act solely by reason of paragraph (1) or (2) of this 42 USC 1395. subsection, (B) the additional a d m i n s t r a t i v e expenses resulting or expected to result therefrom, and (C) any loss in i n t e r e s t to such T r u s t F u n d resulting from the payment of those a m o u n t s, in order to place such T r u s t F u n d in the s a m e position at the end of such fiscal year as it would h a v e been in if this subsection had not been enacted.

Subtitle F—Excise Taxes PART I—AIRPORT AND AIRWAY SEC. 279. TAX ON FUEL USED IN NONCOMMERCIAL AVIATION. (a) IMPOSITION OF T A X. —

(1) GASOLINE F U E L S. — Paragraph (3) of subsection 4041(c) 26 USC 404L (relating to r a t e of tax) is amended by striking out "3 cents a gallon" and inserting in lieu thereof "8 cents a gallon (10V2 cents a gallon in the case of any gasoline with respect to which a tax is imposed under section 4081 a t the r a t e set forth in subsection (b) thereoO". (2) NoNGASOLiNE FUELS.—Paragraph (1) of subsection 4041(c) (relating to tax on fuel used in noncommercial aviation) is amended by striking out "7 c e n t s " and inserting in lieu thereof "14 cents". (3) TERMINATION. — Paragraph (5) of section 4041(c) is amended to read as follows: "(5) TERMINATION. — The taxes imposed by paragraph s (1) and (2) shall apply during the period beginning on September 1, 1982, and ending on December 31, 1987." (b) CERTAIN HELICOPTERS.—

(1) EXEMPTION.—Section 4041 (relating to tax on special fuels) is amended by adding at the end thereof the following new subsection: "(1) E X E M P T I O N FOR CERTAIN HELICOPTER U S E S. — N o tax shall be

imposed under this section on any liquid sold for use in, or used in, a helicopter for the purpose of— "(1) t r a n s p o r t i n g individuals, equipment, or supplies in the exploration for, or the development or removal of, h a r d minerals, or "(2) the planting, cultivation, cutting or transportation of, or caring for, trees (including logging operation), b u t only if the helicopter does not t a k e off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to the Airport and Airway Improvement Act of 1982 during such use." (2) R E F U N D OF TAX.— Subsection (d) of section 6427 (relating to fuels not used for taxable purposes) is amended—

49 USC 1701 ^°^^^°^^' P- ^'^^• ^^ ^ ^ ^ ^^^'^-

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Page:United States Statutes at Large Volume 96 Part 1.djvu/606

 96 STAT. 564

26 USC 4041 note.

PUBLIC LAW 97-248—SEPT. 3, 1982 (A) by inserting "or is used in a helicopter for a purpose described in section 4041(1)," after "section 4041(h)(2)(C),"; and (B) by inserting "or in Certain Helicopters" after "Museu m s " in the caption thereof. (c) EFFECTIVE D A T E. — The amendments m a d e by this section shall t a k e effect on September 1, 1982. SEC. 280. TAX ON TRANSPORTATION BY AIR.

26 USC 4261.

(a) TRANSPORTATION O F PERSONS.—Section 4261 ( r e l a t i n g to impo-

sition of tax) is amended by striking out subsection (e) and inserting in lieu thereof the following new subsections: "(e) E X E M P T I O N FOR CERTAIN HELICOPTER U S E S. — N o tax shall be

49 USC 1701 Posfp 671 ' • 26 USC 4271.

imposed under subsection (a) or (b) on a i r transportation by helicopter for the purpose of— "(1) t r a n s p o r t i n g individuals, equipment, or supplies in the exploration for, or the development or removal of, h a r d minerals, or "(2) the planting, cultivation, cutting, or transportation of, or caring for, trees (including logging operations), but only if the helicopter does not t a k e off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to the Airport and Airway Improvement Act of 1982 during such use. "(f) TERMINATION. — The taxes imposed by this section shall apply with respect to transportation beginning after August 31, 1982, and before January 1, 1988." (b) TRANSPORTATION OF PROPERTY.—Subsection (d) of section 4271

is amended to read a s follows: "(d) TERMINATION. — The tax imposed by subsection (a) shall apply with respect to transportation beginning after August 31, 1982, and before January 1, 1988." (c) R E P E A L OF CERTAIN T E R M I N A T E D T A X E S. —

26 USC 4491-4494.

(1) IN GENERAL.—Subchapter E of chapter repealed.

36 is hereby

(2) CONFORMING AMENDMENTS. —

26 USC 4281.

26 USC 6156.

(A) The table of subchapter s for chapter 36 is amended by striking out the item r e l a t i n g to subchapter E. (B) Section 4281 (relating to small aircraft on nonestablished lines) is amended— (i) by striking out "(as defined in section 4492(b))", and (ii) by adding a t the e n d thereof the following new sentence: " For purposes of the preceding sentence, the term ' maximum certificated takeoff weight' means the maximum such weight contained in the type certificate or airworthiness certificate." (C) Subsection (a) of section 6156 is amended by striking out "or 4491". (D) Paragraph (2) of section 6156(e) is amended by striking o u t "in the case of the tax imposed by section 4481". (E) The section heading for section 6156 is amended by striking o u t " A N D CIVIL AIRCRAFT".

Repeal. 26 USC 6426.

(F) The table of sections for subchapter A of chapter 62 is amended by striking o u t " and civil aircraft" in the item r e l a t i n g to section 6156. (G) Section 6426 is hereby repealed.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/607

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 565

(H) The table of sections for subchapter B of chapter 65 is amended by striking out the item relating to section 6426. (d) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 4261 apply with respect to transportation beginning after August 31, "°*'^1982; except that such amendments shall not apply to any a m o u n t paid on or before such date. SEC. 281. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND.

(a) GENERAL RULE. — Subchapter A of chapter 98 (relating to T r u s t Fund Code) is amended by adding a t the end thereof the following new section: "SEC. 9302. AIRPORT AND AIRWAY TRUST FUND.

26 USC 9502.

"(a) CREATION OF T R U S T F U N D. — The r e is established in the Treas-

ury of the United States a t r u s t fund to be known as the 'Airport and Airway T r u s t Fund', consisting of such a m o u n t s as may be appropriated or credited to the Airport and Airway Trust F u n d as provided in this section or section 9602(b). "(b) TRANSFER TO AIRPORT AND A I R W A Y T R U S T F U N D OF A M O U N T S EQUIVALENT TO CERTAIN T A X E S. — The r e is h e r e by a p p r o p r i a t e d to

the Airport and Airway T r u s t Fund— "(1) a m o u n t s equivalent to the taxes received in the Treasury after August 31, 1982, and before January 1, 1988, under subsections (c) and (d) of section 4041 (taxes on aviation fuel) and under sections 4261 and 4271 (taxes on transportation by air); "(2) a m o u n t s determined by the Secretary of the Treasury to be equivalent to the taxes received in the Treasury after August 31, 1982, and before January 1, 1988, under section 4081, with respect to gasoline used in aircraft; and "(3) a m o u n t s determined by the Secretary of the Treasury to be equivalent to the taxes received in the Treasury after August 31, 1982, and before January 1, 1988, under paragraph s (2) and (3) of section 4071(a), with respect to tires and tubes of the types used on aircraft. "(c)

APPROPRIATION

OF ADDITIONAL

SUMS.—There

are

hereby

authorized to be appropriated to the Airport and Airway Trust Fund such additional sums as may be required to m a k e the expenditures referred to in subsection (d) of this section. "(d) EXPENDITURES F R O M AIRPORT AND AIRWAY T R U S T F U N D. — "(1) AIRPORT AND AIRWAY P R O G R A M. — A m o u n t s in the A i r p o r t

and Airway T r u s t Fund shall be available, as provided by appropriation Acts, for making expenditures before October 1, 1987, to meet those obligations of the United States— "(A) incurred under title I of the Airport and Airway Development Act of 1970 or of the Airport and Airway Development Act Amendments of 1976 or of the Aviation Safety and Noise A b a t e m e n t Act of 1979 or under the Fiscal Year 1981 Airport Development Authorization Act or the provisions of the Airport and Airway Improvement Act of 1982 (as such Acts were in effect on the date of the enactm e n t of the Airport and Airway Improvement Act of 1982); "(B) heretofore or hereafter incurred under the Federal Aviation Act of 1958, as amended (49 U.S.C. 1301 et seq.), which a r e a t t r i b u t a b l e to planning, research and development, construction, or operation and m a i n t e n a n c e of— "(i) a i r traffic control, "(ii) a i r navigation.

49 USC 1701. 49 USC 1701 ^a^fjc 2101 49 USC note.^ 95 Stat. 622. Post, p. 671.

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Page:United States Statutes at Large Volume 96 Part 1.djvu/608

 96 STAT. 566

PUBLIC LAW 97-248—SEPT. 3, 1982 "(iii) communications, or "(iv) supporting services, for the airway system; or "(C) for those portions of the administrative expenses of the Department of Transportation which a r e a t t r i b u t a b l e to activities described in subparagraph (A) or (B). "(2) TRANSFERS FROM AIRPORT AND AIRWAY TRUST FUND ON

ACCOUNT OF CERTAIN REFUNDS.—The Secretary of the Treasury shall pay from time to time from the Airport and Airway Trust Fund into the general fund of the Treasury a m o u n t s equivalent to the a m o u n t s paid after August 31, 1982, in respect of fuel used in aircraft, under section 6420 (relating to a m o u n t s paid in respect of gasoline used on farms, 6421 (relating to a m o u n t s paid in respect of gasoline used for certain nonhighway purposes), or 6427 (relating to fuels not used for taxable purposes). "(3) TRANSFERS FROM THE AIRPORT AND AIRWAY TRUST FUND ON

ACCOUNT OF CERTAIN SECTION 39 CREDITS.—The Secretary of the Treasury shall pay from time to time from the Airport and Airway Trust Fund into the general fund of the Treasury a m o u n t s equivalent to the credits allowed under section 39 with respect to fuel used after August 31, 1982. Such a m o u n t s shall be transferred on the basis of estimates by the Secretary of the Treasury, and proper adjustments shall be made in a m o u n t s subsequently transferred to the extent prior estimates were in excess of or less than the credits allowed.". (b) R E P E A L OF SECTION 208 OF THE AIRPORT AND A I R W A Y R E V E N U E

49 USC 1742.

ACT OF 1970.—Section 208 of the Airport and Airway Revenue Act of 1970 is hereby repealed. (c) CONFORMING AMENDMENTS. —

26 USC 9501.

26 USC 9502

"°*'®-

Supra,

(1) The table of sections for subchapter A of chapter 98 is amended to read as follows: "Sec. 9501. Black Lung Disability Trust Fund. "Sec. 9502. Airport and Airway Trust Fund.". (2) The section heading for section 9501 (relating to establishment of Black Lung Disability Trust Fund) is amended to read as follows: "SEC. 9501. BLACK LUNG DISABILITY TRUST FUND.". (d) EFFECTIVE D A T E. —

(1) IN GENERAL.—The amendments made by this section shall t a k e effect on September 1, 1982. (2) SAVINGS PROVISIONS.—The Airport and Airway Trust Fund established by the amendments made by this section shall be treated for all purposes of law as the continuation of the Airport and Airway Trust Fund established by section 208 of the Airport and Airway Revenue Act of 1970. Any reference in any law to the Airport and Airway Trust Fund established by such section 208 shall be deemed to include a reference to the Airport and Airway Trust Fund established by the amendments made by this section. SEC. 281A. TECHNICAL PROVISIONS RELATING TO TAX ON TRANSPORTATION OF PERSONS BY AIR. (a) T E C H N I C A L MODIFICATIONS TO TRANSPORTATION OF PASSENGERS B AIR.— Y (1) L O N G E R LAYOVER PERMITTED TO QUALIFY AS UNINTERRUPTED INTERNATIONAL AIR T R A N S P O R T A T I O N. — Paragraph (3) of section

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