Internal Revenue Code:Sec. 26. Limitation based on tax liability; definition of tax liability
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart A - Nonrefundable Personal Credits
Statute
Sec. 26. Limitation based on tax liability; definition of tax
liability
(a) Limitation based on amount of tax
(1) In general
The aggregate amount of credits allowed by this subpart (other
than sections 23, 24, and 25B) for the taxable year shall not
exceed the excess (if any) of -
(A) the taxpayer's regular tax liability for the taxable
year, over
(B) the tentative minimum tax for the taxable year
(determined without regard to the alternative minimum tax
foreign tax credit).
For purposes of subparagraph (B), the taxpayer's tentative
minimum tax for any taxable year beginning during 1999 shall be
treated as being zero.
(2) Special rule for taxable years 2000 and 2006.
For purposes of any taxable year beginning during 2000, 2001,
2002, 2003, 2004, 2005, or 2006 the aggregate amount of credits allowed
by this subpart for the taxable year shall not exceed
the sum of -
(A) the taxpayer's regular tax liability for the taxable year
reduced by the foreign tax credit allowable under section
27(a), and
(B) the tax imposed by section 55(a) for the taxable year.
(b) Regular tax liability
For purposes of this part -
(1) In general
The term ''regular tax liability'' means the tax imposed by
this chapter for the taxable year.
(2) Exception for certain taxes
For purposes of paragraph (1), any tax imposed by any of the
following provisions shall not be treated as tax imposed by this
chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to environmental tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72
(relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of
Federal subsidy from use of mortgage bonds and mortgage credit
certificates),
(E) section 530(d)(4) (relating to additional tax on certain
distributions from Coverdell education savings accounts),
(F) section 531 (relating to accumulated earnings tax),
(G) section 541 (relating to personal holding company tax),
(H) section 1351(d)(1) (relating to recoveries of foreign
expropriation losses),
(I) section 1374 (relating to tax on certain built-in gains
of S corporations),
(J) section 1375 (relating to tax imposed when passive
investment income of corporation having subchapter C earnings
and profits exceeds 25 percent of gross receipts),
(K) subparagraph (A) of section 7518(g)(6) (relating to
nonqualified withdrawals from capital construction funds taxed
at highest marginal rate),
(L) sections 871(a) and 881 (relating to certain income of
nonresident aliens and foreign corporations),
(M) section 860E(e) (relating to taxes with respect to
certain residual interests),
(N) section 884 (relating to branch profits tax),
(O) sections 453(l)(3) and 453A(c) (relating to interest on
certain deferred tax liabilities),
(P) section 860K (relating to treatment of transfers of
high-yield interests to disqualified holders),
(Q) section 220(f)(4) (relating to additional tax on Archer
MSA distributions not used for qualified medical expenses),
(R) section 138(c)(2) (relating to penalty for
distributions from Medicare Advantage MSA not used for
qualified medical expenses if minimum balance not
maintained),
(S) section 223(f)(4) (relating to additional tax
on health savings account distributions not used for
qualified medical expenses), and
(T) subsections (a)(1)(B)(i) and (b)(4)(A) of
section 409A (relating to interest and additional tax
with respect to certain deferred compensation).
(c) Tentative minimum tax
For purposes of this part, the term ''tentative minimum tax''
means the amount determined under section 55(b)(1).
Sources
(Added Sec. 25, renumbered Sec. 26, Pub. L. 98-369, div. A, title
IV, Sec. 472, title VI, Sec. 612(a), July 18, 1984, 98 Stat. 827,
905; amended Pub. L. 99-499, title V, Sec. 516(b)(1)(A), Oct. 17,
1986, 100 Stat. 1770; Pub. L. 99-514, title II, Sec. 261(c), title
VI, Sec. 632(c)(1), title VII, Sec. 701(c)(1), Oct. 22, 1986, 100
Stat. 2214, 2277, 2340; Pub. L. 100-647, title I, Sec.
1006(t)(16)(C), 1007(g)(1), 1011A(c)(10), 1012(q)(8), title IV,
Sec. 4005(g)(4), title V, Sec. 5012(b)(2), Nov. 10, 1988, 102 Stat.
3425, 3434, 3476, 3524, 3650, 3662; Pub. L. 101-239, title VII,
Sec. 7811(c)(1), (2), 7821(a)(4)(A), Dec. 19, 1989, 103 Stat. 2406,
2407, 2424; Pub. L. 104-188, title I, Sec. 1621(b)(1), Aug. 20,
1996, 110 Stat. 1866; Pub. L. 105-34, title II, Sec. 213(e)(1),
title XVI, Sec. 1602(a)(1), Aug. 5, 1997, 111 Stat. 817, 1093; Pub.
L. 105-277, div. J, title II, Sec. 2001(a), Oct. 21, 1998, 112
Stat. 2681-901; Pub. L. 106-170, title V, Sec. 501(a), Dec. 17,
1999, 113 Stat. 1918; Pub. L. 106-554, Sec. 1(a)(7) (title II, Sec.
202(a)(1)), Dec. 21, 2000, 114 Stat. 2763, 2763A-628; Pub. L.
107-16, title II, Sec. 201(b)(2)(D), 202(f)(2)(C), title VI, Sec.
618(b)(2)(C), June 7, 2001, 115 Stat. 46, 49, 108; Pub. L. 107-22,
Sec. 1(b)(2)(A), July 26, 2001, 115 Stat. 197.)
Amendment of Section
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
Miscellaneous
AMENDMENTS
2006 - P.L. 109-222
SEC. 302. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR
AND ALTERNATIVE MINIMUM TAX LIABILITY.
(a) In General.--Paragraph (2) of section 26(a) is amended--
(1) by striking ``2005'' in the heading thereof and
inserting ``2006'', and
(2) by striking ``or 2005'' and inserting ``2005, or 2006''.
(b) Effective Date.--The <<NOTE: 26 USC 26 note.>> amendments made
by this section shall apply to taxable years beginning after December
31, 2005.
2005 - P.L. 109-135, Section 403
(1) Paragraph (2) of section 26(b) is amended by striking
``and'' at the end of subparagraph (R), by striking the period
at the end of subparagraph (S) and inserting ``, and'', and by
adding at the end the following new subparagraph:
``(T) subsections (a)(1)(B)(i) and (b)(4)(A) of
section 409A (relating to interest and additional tax
with respect to certain deferred compensation).''.
2004 - Pub.L. 108-311 Sec. 401(a)(1). Paragraph (2) of section 26(b)
is amended by striking ``and'' at the end of subparagraph (Q), by
striking the period at the end of subparagraph (R) and inserting
``, and'', and by adding at the end the following new subparagraph:
(S) section 223(f)(4) (relating to additional tax
on health savings account distributions not used for
qualified medical expenses).
2004 - Subsec.312(a),Pub.L.108-311, amended Sec.26(a)(2)
by adding 2004 and 2005 to the applicable years.
2002 - Subsec.415(a), Pub. L. 107-147, amends Sec 26(b)(2)
(P) and adds subparagrah (R). This amendment shall take effect
as if included in section 4006 of the Balanced Budget Act of 1997.
2002 - Pub. L. 107-147, Sec. 601 (a), amended Sec. 26 (a)(2), by
substituting 2000, 2001, 2002, and 2003 for 2000 and 2001 for the
special rule. The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
Subsec. (a)(1). Pub. L. 107-16, Sec. 618(b)(2)(C), 901,
temporarily substituted '', 24, and 25B'' for ''and 24'' in
introductory provisions. See Effective and Termination Dates of
2001 Amendment note below.
Pub. L. 107-16, Sec. 202(f)(2)(C), 901, temporarily substituted
''sections 23 and 24'' for ''section 24'' in introductory
provisions. See Effective and Termination Dates of 2001 Amendment
note below.
Pub. L. 107-16, Sec. 201(b)(2)(D), 901, temporarily inserted
''(other than section 24)'' after ''this subpart'' in introductory
provisions. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (b)(2)(E). Pub. L. 107-22 substituted ''Coverdell
education savings'' for ''education individual retirement''.
2000 - Subsec. (b)(2)(Q). Pub. L. 106-554 substituted ''Archer
MSA'' for ''medical savings account''.
1999 - Subsec. (a). Pub. L. 106-170 reenacted subsec. heading
without change and amended text generally. Prior to amendment,
text read as follows: ''The aggregate amount of credits allowed by
this subpart for the taxable year shall not exceed the excess (if
any) of -
''(1) the taxpayer's regular tax liability for the taxable
year, over
''(2) the tentative minimum tax for the taxable year
(determined without regard to the alternative minimum tax foreign
tax credit).
For purposes of paragraph (2), the taxpayer's tentative minimum tax
for any taxable year beginning during 1998 shall be treated as
being zero.''
1998 - Subsec. (a). Pub. L. 105-277 inserted concluding
provisions.
1997 - Subsec. (b)(2)(E) to (O). Pub. L. 105-34, Sec. 213(e)(1),
added subpar. (E) and redesignated former subpars. (E) to (N) as
(F) to (O), respectively. Former subpar. (O) redesignated (P).
Subsec. (b)(2)(P). Pub. L. 105-34, Sec. 213(e)(1), redesignated
subpar. (P) as (Q).
Pub. L. 105-34, Sec. 1602(a)(1), added subpar. (P).
Subsec. (b)(2)(Q). Pub. L. 105-34, Sec. 213(e)(1), redesignated
subpar. (P) as (Q).
1996 - Subsec. (b)(2)(O). Pub. L. 104-188 added subpar. (O).
1989 - Subsec. (b)(2)(C), (D). Pub. L. 101-239, Sec. 7811(c)(1),
amended subpars. (C) and (D) generally. Prior to amendment,
subpars. (C) and (D) read as follows:
''(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to
additional tax on certain distributions),
''(D) section 72(t) (relating to 10-percent additional tax on
early distributions from qualified retirement plans),''.
Subsec. (b)(2)(K). Pub. L. 101-239, Sec. 7811(c)(2), added
subpar. (K) and struck out former subpar. (K) which was identical.
Subsec. (b)(2)(L), (M). Pub. L. 101-239, Sec. 7811(c)(2), added
subpars. (L) and (M) and struck out former subpars. (L) and (M)
which read as follows:
''(L) section 860E(e) (relating to taxes with respect to certain
residual interests), and
''(L) section 884 (relating to branch profits tax), and
''(M) section 143(m) (relating to recapture of portion of federal
subsidy from use of mortgage bonds and mortgage credit
certificates).''
Subsec. (b)(2)(N). Pub. L. 101-239, Sec. 7821(a)(4)(A), which
directed amendment of subsec. (b)(2) of this section ''as amended
by section 11811'' by adding subpar. (N), was executed as if it
directed amendment of subsec. (b)(2) of this section ''as amended
by section 7811'', to reflect the probable intent of Congress and
the renumbering of section 11811 of H.R. 3299 as section 7811 prior
to the enactment of H.R. 3299 into law as Pub. L. 101-239.
1988 - Subsec. (b)(2)(C). Pub. L. 100-647, Sec. 1011A(c)(10)(A),
struck out '', (o)(2),'' after ''subsection (m)(5)(B)''.
Pub. L. 100-647, Sec. 5012(b)(2), substituted ''(q), or (v)'' for
''or (q)''.
Subsec. (b)(2)(D). Pub. L. 100-647, Sec. 1011A(c)(10)(B),
substituted ''72(t) (relating to 10-percent additional tax on early
distributions from qualified retirement plans)'' for ''408(f)
(relating to additional tax on income from certain retirement
accounts)''.
Subsec. (b)(2)(K). Pub. L. 100-647, Sec. 1007(g)(1), substituted
''corporations).'' for ''corporations,''.
Subsec. (b)(2)(L). Pub. L. 100-647, Sec. 1012(q)(8), added
subpar. (L) relating to branch profits tax.
Pub. L. 100-647, Sec. 1006(t)(16)(C), added subpar. (L) relating
to taxes with respect to certain residual interests.
Subsec. (b)(2)(M). Pub. L. 100-647, Sec. 4005(g)(4), added
subpar. (M).
1986 - Subsec. (a). Pub. L. 99-514, Sec. 701(c)(1)(A), amended
subsec. (a) generally. Prior to amendment, subsec. (a) read as
follows: ''The aggregate amount of credits allowed by this subpart
for the taxable year shall not exceed the taxpayer's tax liability
for such taxable year.''
Subsec. (b). Pub. L. 99-514, Sec. 701(c)(1)(B)(i), (v),
substituted ''Regular tax liability'' for ''Tax liability'' in
heading and ''this part'' for ''this section'' in introductory
provisions.
Subsec. (b)(1). Pub. L. 99-514, Sec. 701(c)(1)(B)(ii),
substituted ''regular tax liability'' for ''tax liability''.
Subsec. (b)(2). Pub. L. 99-499 added subpar. (B) and redesignated
former subpars. (B) to (J) as (C) to (K), respectively.
Pub. L. 99-514, Sec. 701(c)(1)(B)(iii), substituted ''section 55
(relating to minimum tax)'' for ''section 56 (relating to corporate
minimum tax)'' in subpar. (A).
Pub. L. 99-514, Sec. 632(c)(1), substituted ''certain built-in
gains'' for ''certain capital gains'' in subpar. (G).
Pub. L. 99-514, Sec. 261(c), added subpar. (I).
Pub. L. 99-514, Sec. 701(c)(1)(B)(iv), added subpar. (J).
Subsec. (c). Pub. L. 99-514, Sec. 701(c)(1)(C), amended subsec.
(c) generally, substituting provisions relating to tentative
minimum tax for provisions referring to section 55(c) of this title
for similar rule for alternative minimum tax for taxpayers other
than corporations.
EFFECTIVE DATE OF 2006 AMENDMENT
2006 - P.L. 109-222
SEC. 302. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR
AND ALTERNATIVE MINIMUM TAX LIABILITY.
(b) Effective Date.--The <<NOTE: 26 USC 26 note.>> amendments made
by this section shall apply to taxable years beginning after December
31, 2005.
EFFECTIVE DATES OF 2004 AMENDMENTS
Pub.L.108-311,Sec.312(a) has an effective date for
amendments to Sec.26 for taxable years beginning after
December 31, 2003.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Pub. L. 107-22, Sec. 1(c), July 26, 2001, 115 Stat. 197, provided
that: ''The amendments made by this section (amending this section
and sections 72, 135, 529, 530, 4973, 4975, and 6693 of this title)
shall take effect on the date of the enactment of this Act (July
26, 2001).''
Amendment by section 201(b)(2)(D) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 201(e)(2)
of Pub. L. 107-16, set out as a note under section 24 of this
title.
Amendment by section 202(f)(2)(C) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 202(g)(1)
of Pub. L. 107-16, set out as a note under section 23 of this
title.
Amendment by section 618(b)(2)(C) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 618(d) of
Pub. L. 107-16, set out as a note under section 24 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to taxable years
beginning after Dec. 31, 1998, see section 501(c) of Pub. L.
106-170, set out as a note under section 24 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-277 applicable to taxable years
beginning after Dec. 31, 1997, see section 2001(c) of Pub. L.
105-277, set out as a note under section 24 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 213(f) of Pub. L. 105-34 provided that: ''The amendments
made by this section (enacting section 530 of this title and
amending this section and sections 135, 4973, 4975, and 6693 of
this title) shall apply to taxable years beginning after December
31, 1997.''
Section 1602(i) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section and sections 162, 220,
264, 877, 2107, 2501, 4975, 6050Q, 6652, 6693, 6724, and 7702B of
this title, renumbering section 6039F of this title as section
6039G of this title, and amending provisions set out as a note
under section 264 of this title) shall take effect as if included
in the provisions of the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191) to which such
amendments relate.''
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1621(d) of Pub. L. 104-188 provided that: ''The
amendments made by this section (enacting sections 860H to 860L of
this title and amending this section and sections 56, 382, 582,
856, 860G, 1202, and 7701 of this title) shall take effect on
September 1, 1997.''
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7811(c)(1), (2) of Pub. L. 101-239
effective, except as otherwise provided, as if included in the
provision of the Technical and Miscellaneous Revenue Act of 1988,
Pub. L. 100-647, to which such amendment relates, see section 7817
of Pub. L. 101-239, set out as a note under section 1 of this
title.
Section 7823 of Pub. L. 101-239 provided that: ''Except as
otherwise provided in this part (part II (Sec. 7821-7823) of
subtitle H of title VII of Pub. L. 101-239, amending this section
and sections 453A, 842, 1503, 6427, 6655, 6863, 7519, 7611, 9502,
9503, and 9508 of this title and enacting provisions set out as
notes under sections 56 and 7519 of this title), any amendment made
by this part shall take effect as if included in the provision of
the 1987 Act (Pub. L. 100-203, title X) to which such amendment
relates.''
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1006(t)(16)(C) of Pub. L. 100-647
applicable, with certain exceptions, to transfers after Mar. 31,
1988, and to excess inclusions for periods after Mar. 31, 1988, see
section 1006(t)(16)(D)(ii)-(iv) of Pub. L. 100-647, set out as a
note under section 860E of this title.
Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) of
Pub. L. 100-647 effective, except as otherwise provided, as if
included in the provision of the Tax Reform Act of 1986, Pub. L.
99-514, to which such amendment relates, see section 1019(a) of
Pub. L. 100-647, set out as a note under section 1 of this title.
Amendment by section 4005(g)(4) of Pub. L. 100-647 applicable,
with certain exceptions, to financing provided, and mortgage credit
certificates issued, after Dec. 31, 1990, see section 4005(h)(3) of
Pub. L. 100-647, set out as a note under section 143 of this title.
Amendment by section 5012(b)(2) of Pub. L. 100-647 applicable to
contracts entered into on or after June 21, 1988, with special rule
where death benefit increases by more than $150,000, certain other
material changes taken into account, and certain exchanges
permitted, see section 5012(e) of Pub. L. 100-647, set out as an
Effective Date note under section 7702A of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 261(c) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 261(g) of
Pub. L. 99-514, set out as an Effective Date note under section
7518 of this title.
Amendment by section 632(c)(1) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, but only in cases
where the return for the taxable year is filed pursuant to an S
election made after Dec. 31, 1986, see section 633(b) of Pub. L.
99-514, as amended, set out as an Effective Date note under section
336 of this title.
Amendment by section 632(c)(1) of Pub. L. 99-514 not applicable
in the case of certain transactions, see section 54(d)(3)(D) of
Pub. L. 98-369, as amended, set out as an Effective Date of 1984
Amendment note under section 311 of this title.
Amendment by section 701(c)(1) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 701(f) of Pub. L.
99-514, set out as an Effective Date note under section 55 of this
title.
Section 516(c) of Pub. L. 99-499 provided that: ''The amendments
made by this section (enacting section 59A of this title and
amending this section and sections 164, 275, 936, 1561, 6154, 6425,
and 6655 of this title) shall apply to taxable years beginning
after December 31, 1986.''
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1983, and to carrybacks from such years, see section 475(a) of Pub.
L. 98-369, set out as an Effective Date of 1984 Amendment note
under section 21 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99-514 IN
RELATION TO TREATY OBLIGATIONS OF UNITED STATES
For applicability of amendment by section 701(c)(1) of Pub. L.
99-514 notwithstanding any treaty obligation of the United States
in effect on Oct. 22, 1986, with provision that for such purposes
any amendment by title I of Pub. L. 100-647 be treated as if it had
been included in the provision of Pub. L. 99-514 to which such
amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100-647,
set out as a note under section 861 of this title.
TREATMENT OF TAX IMPOSED UNDER FORMER SECTION 409(C)
Section 491(f)(5) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''For
purposes of section 26(b) of the Internal Revenue Code of 1986
(formerly I.R.C. 1954) (as amended by this Act), any tax imposed by
section 409(c) of such Code (as in effect before its repeal by this
section) shall be treated as a tax imposed by section 408(f) of
such Code.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 24, 25, 25B, 39, 55, 163,
469, 901, 1397E, 1400C, 6428 of this title.
