Internal Revenue Code:Sec. 409. Qualifications for tax credit employee stock ownership plans
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
Statute
Sec. 409. Qualifications for tax credit employee stock ownership
plans
(a) Tax credit employee stock ownership plan defined
Except as otherwise provided in this title, for purposes of this
title, the term ''tax credit employee stock ownership plan'' means
a defined contribution plan which -
(1) meets the requirements of section 401(a),
(2) is designed to invest primarily in employer securities, and
(3) meets the requirements of subsections (b), (c), (d), (e),
(f), (g), (h), and (o) of this section.
(b) Required allocation of employer securities
(1) In general
A plan meets the requirements of this subsection if -
(A) the plan provides for the allocation for the plan year of
all employer securities transferred to it or purchased by it
(because of the requirements of section 41(c)(1)(B)) (FOOTNOTE
1) to the accounts of all participants who are entitled to
share in such allocation, and
(FOOTNOTE 1) See References in Text note below.
(B) for the plan year the allocation to each participant so
entitled is an amount which bears substantially the same
proportion to the amount of all such securities allocated to
all such participants in the plan for that year as the amount
of compensation paid to such participant during that year bears
to the compensation paid to all such participants during that
year.
(2) Compensation in excess of $100,000 disregarded
For purposes of paragraph (1), compensation of any participant
in excess of the first $100,000 per year shall be disregarded.
(3) Determination of compensation
For purposes of this subsection, the amount of compensation
paid to a participant for any period is the amount of such
participant's compensation (within the meaning of section
415(c)(3)) for such period.
(4) Suspension of allocation in certain cases
Notwithstanding paragraph (1), the allocation to the account of
any participant which is attributable to the basic employee plan
credit or the credit allowed under section 41 (FOOTNOTE 1)
(relating to the employee stock ownership credit) may be extended
over whatever period may be necessary to comply with the
requirements of section 415.
(c) Participants must have nonforfeitable rights
A plan meets the requirements of this subsection only if it
provides that each participant has a nonforfeitable right to any
employer security allocated to his account.
(d) Employer securities must stay in the plan
A plan meets the requirements of this subsection only if it
provides that no employer security allocated to a participant's
account under subsection (b) (or allocated to a participant's
account in connection with matched employer and employee
contributions) may be distributed from that account before the end
of the 84th month beginning after the month in which the security
is allocated to the account. To the extent provided in the plan,
the preceding sentence shall not apply in the case of -
(1) death, disability, separation from service, or termination
of the plan;
(2) a transfer of a participant to the employment of an
acquiring employer from the employment of the selling corporation
in the case of a sale to the acquiring corporation of
substantially all of the assets used by the selling corporation
in a trade or business conducted by the selling corporation, or
(3) with respect to the stock of a selling corporation, a
disposition of such selling corporation's interest in a
subsidiary when the participant continues employment with such
subsidiary.
This subsection shall not apply to any distribution required under
section 401(a)(9) or to any distribution or reinvestment required
under section 401(a)(28).
(e) Voting rights
(1) In general
A plan meets the requirements of this subsection if it meets
the requirements of paragraph (2) or (3), whichever is
applicable.
(2) Requirements where employer has a registration-type class of
securities
If the employer has a registration-type class of securities,
the plan meets the requirements of this paragraph only if each
participant or beneficiary in the plan is entitled to direct the
plan as to the manner in which securities of the employer which
are entitled to vote and are allocated to the account of such
participant or beneficiary are to be voted.
(3) Requirement for other employers
If the employer does not have a registration-type class of
securities, the plan meets the requirements of this paragraph
only if each participant or beneficiary in the plan is entitled
to direct the plan as to the manner in which voting rights under
securities of the employer which are allocated to the account of
such participant or beneficiary are to be exercised with respect
to any corporate matter which involves the voting of such shares
with respect to the approval or disapproval of any corporate
merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a
trade or business, or such similar transaction as the Secretary
may prescribe in regulations.
(4) Registration-type class of securities defined
For purposes of this subsection, the term, ''registration-type
class of securities'' means -
(A) a class of securities required to be registered under
section 12 of the Securities Exchange Act of 1934, and
(B) a class of securities which would be required to be so
registered except for the exemption from registration provided
in subsection (g)(2)(H) of such section 12.
(5) 1 vote per participant
A plan meets the requirements of paragraph (3) with respect to
an issue if -
(A) the plan permits each participant 1 vote with respect to
such issue, and
(B) the trustee votes the shares held by the plan in the
proportion determined after application of subparagraph (A).
(f) Plan must be established before employer's due date
(1) In general
A plan meets the requirements of this subsection only if it is
established on or before the due date (including any extension of
such date) for the filing of the employer's tax return for the
first taxable year of the employer for which an employee plan
credit is claimed by the employer with respect to the plan.
(2) Special rule for first year
A plan which otherwise meets the requirements of this section
shall not be considered to have failed to meet the requirements
of section 401(a) merely because it was not established by the
close of the first taxable year of the employer for which an
employee plan credit is claimed by the employer with respect to
the plan.
(g) Transferred amounts must stay in plan even though investment
credit is redetermined or recaptured
A plan meets the requirement of this subsection only if it
provides that amounts which are transferred to the plan (because of
the requirements of section 48(n)(1) or 41(c)(1)(B)) (FOOTNOTE 2)
shall remain in the plan (and, if allocated under the plan, shall
remain so allocated) even though part or all of the employee plan
credit or the credit allowed under section 41 (FOOTNOTE 2)
(relating to employee stock ownership credit) is recaptured or
redetermined. For purposes of the preceding sentence, the
references to section 48(n)(1) (FOOTNOTE 2) and the employee plan
credit shall refer to such section and credit as in effect before
the enactment of the Tax Reform Act of 1984.
(FOOTNOTE 2) See References in Text note below.
(h) Right to demand employer securities; put option
(1) In general
A plan meets the requirements of this subsection if a
participant who is entitled to a distribution from the plan -
(A) has a right to demand that his benefits be distributed in
the form of employer securities, and
(B) if the employer securities are not readily tradable on an
established market, has a right to require that the employer
repurchase employer securities under a fair valuation formula.
(2) Plan may distribute cash in certain cases
(A) In general
A plan which otherwise meets the requirements of this
subsection or of section 4975(e)(7) shall not be considered to
have failed to meet the requirements of section 401(a) merely
because under the plan the benefits may be distributed in cash
or in the form of employer securities.
(B) Exception for certain plans restricted from distributing
securities
(i) In general
A plan to which this subparagraph applies shall not be
treated as failing to meet the requirements of this
subsection or section 401(a) merely because it does not
permit a participant to exercise the right described in
paragraph (1)(A) if such plan provides that the participant
entitled to a distribution has a right to receive the
distribution in cash, except that such plan may distribute
employer securities subject to a requirement that such
securities may be resold to the employer under terms which
meet the requirements of paragraph (1)(B).
(ii) Applicable plans
This subparagraph shall apply to a plan which otherwise
meets the requirements of this subsection or section
4975(e)(7) and which is established and maintained by -
(I) an employer whose charter or bylaws restrict the
ownership of substantially all outstanding employer
securities to employees or to a trust described in section
401(a), or
(II) an S corporation.
(3) Special rule for banks
In the case of a plan established and maintained by a bank (as
defined in section 581) which is prohibited by law from redeeming
or purchasing its own securities, the requirements of paragraph
(1)(B) shall not apply if the plan provides that participants
entitled to a distribution from the plan shall have a right to
receive a distribution in cash.
(4) Put option period
An employer shall be deemed to satisfy the requirements of
paragraph (1)(B) if it provides a put option for a period of at
least 60 days following the date of distribution of stock of the
employer and, if the put option is not exercised within such
60-day period, for an additional period of at least 60 days in
the following plan year (as provided in regulations promulgated
by the Secretary).
(5) Payment requirement for total distribution
If an employer is required to repurchase employer securities
which are distributed to the employee as part of a total
distribution, the requirements of paragraph (1)(B) shall be
treated as met if -
(A) the amount to be paid for the employer securities is paid
in substantially equal periodic payments (not less frequently
than annually) over a period beginning not later than 30 days
after the exercise of the put option described in paragraph (4)
and not exceeding 5 years, and
(B) there is adequate security provided and reasonable
interest paid on the unpaid amounts referred to in subparagraph
(A).
For purposes of this paragraph, the term ''total distribution''
means the distribution within 1 taxable year to the recipient of
the balance to the credit of the recipient's account.
(6) Payment requirement for installment distributions
If an employer is required to repurchase employer securities as
part of an installment distribution, the requirements of
paragraph (1)(B) shall be treated as met if the amount to be paid
for the employer securities is paid not later than 30 days after
the exercise of the put option described in paragraph (4).
(7) Exception where employee elected diversification
Paragraph (1)(A) shall not apply with respect to the portion of
the participant's account which the employee elected to have
reinvested under section 401(a)(28)(B) or subparagraph (B) or (C)
of section 401(a)(35).
(i) Reimbursement for expenses of establishing and administering
plan
A plan which otherwise meets the requirements of this section
shall not be treated as failing to meet such requirements merely
because it provides that -
(1) Expenses of establishing plan
As reimbursement for the expenses of establishing the plan, the
employer may withhold from amounts due the plan for the taxable
year for which the plan is established (or the plan may pay) so
much of the amounts paid or incurred in connection with the
establishment of the plan as does not exceed the sum of -
(A) 10 percent of the first $100,000 which the employer is
required to transfer to the plan for that taxable year under
section 41(c)(1)(B), (FOOTNOTE 3) and
(FOOTNOTE 3) See References in Text note below.
(B) 5 percent of any amount so required to be transferred in
excess of the first $100,000; and
(2) Administrative expenses
As reimbursement for the expenses of administering the plan,
the employer may withhold from amounts due the plan (or the plan
may pay) so much of the amounts paid or incurred during the
taxable year as expenses of administering the plan as does not
exceed the lesser of -
(A) the sum of -
(i) 10 percent of the first $100,000 of the dividends paid
to the plan with respect to stock of the employer during the
plan year ending with or within the employer's taxable year,
and
(ii) 5 percent of the amount of such dividends in excess of
$100,000 or
(B) $100,000.
(j) Conditional contributions to the plan
A plan which otherwise meets the requirements of this section
shall not be treated as failing to satisfy such requirements (or as
failing to satisfy the requirements of section 401(a) of this title
or of section 403(c)(1) of the Employee Retirement Income Security
Act of 1974) merely because of the return of a contribution (or a
provision permitting such a return) if -
(1) the contribution to the plan is conditioned on a
determination by the Secretary that such plan meets the
requirements of this section,
(2) the application for a determination described in paragraph
(1) is filed with the Secretary not later than 90 days after the
date on which an employee plan credit is claimed, and
(3) the contribution is returned within 1 year after the date
on which the Secretary issues notice to the employer that such
plan does not satisfy the requirements of this section.
(k) Requirements relating to certain withdrawals
Notwithstanding any other law or rule of law -
(1) the withdrawal from a plan which otherwise meets the
requirements of this section by the employer of an amount
contributed for purposes of the matching employee plan credit
shall not be considered to make the benefits forfeitable, and
(2) the plan shall not, by reason of such withdrawal, fail to
be for the exclusive benefit of participants or their
beneficiaries,
if the withdrawn amounts were not matched by employee contributions
or were in excess of the limitations of section 415. Any withdrawal
described in the preceding sentence shall not be considered to
violate the provisions of section 403(c)(1) of the Employee
Retirement Income Security Act of 1974. For purposes of this
subsection, the reference to the matching employee plan credit
shall refer to such credit as in effect before the enactment of the
Tax Reform Act of 1984.
(l) Employer securities defined
For purposes of this section -
(1) In general
The term ''employer securities'' means common stock issued by
the employer (or by a corporation which is a member of the same
controlled group) which is readily tradable on an established
securities market.
(2) Special rule where there is no readily tradable common stock
If there is no common stock which meets the requirements of
paragraph (1), the term ''employer securities'' means common
stock issued by the employer (or by a corporation which is a
member of the same controlled group) having a combination of
voting power and dividend rights equal to or in excess of -
(A) that class of common stock of the employer (or of any
other such corporation) having the greatest voting power, and
(B) that class of common stock of the employer (or of any
other such corporation) having the greatest dividend rights.
(3) Preferred stock may be issued in certain cases
Noncallable preferred stock shall be treated as employer
securities if such stock is convertible at any time into stock
which meets the requirements of paragraph (1) or (2) (whichever
is applicable) and if such conversion is at a conversion price
which (as of the date of the acquisition by the tax credit
employee stock ownership plan) is reasonable. For purposes of
the preceding sentence, under regulations prescribed by the
Secretary, preferred stock shall be treated as noncallable if
after the call there will be a reasonable opportunity for a
conversion which meets the requirements of the preceding
sentence.
(4) Application to controlled group of corporations
(A) In general
For purposes of this subsection, the term ''controlled group
of corporations'' has the meaning given to such term by section
1563(a) (determined without regard to subsections (a)(4) and
(e)(3)(C) of section 1563).
(B) Where common parent owns at least 50 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing at least 50 percent of the voting
power of all classes of stock and at least 50 percent of each
class of nonvoting stock in a first tier subsidiary, such
subsidiary (and all other corporations below it in the chain
which would meet the 80 percent test of section 1563(a) if the
first tier subsidiary were the common parent) shall be treated
as includible corporations.
(C) Where common parent owns 100 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing all of the voting power of all
classes of stock and all of the nonvoting stock, in a first
tier subsidiary, and if the first tier subsidiary owns directly
stock possessing at least 50 percent of the voting power of all
classes of stock, and at least 50 percent of each class of
nonvoting stock, in a second tier subsidiary of the common
parent, such second tier subsidiary (and all other corporations
below it in the chain which would meet the 80 percent test of
section 1563(a) if the second tier subsidiary were the common
parent) shall be treated as includible corporations.
(5) Nonvoting common stock may be acquired in certain cases
Nonvoting common stock of an employer described in the second
sentence of section 401(a)(22) shall be treated as employer
securities if an employer has a class of nonvoting common stock
outstanding and the specific shares that the plan acquires have
been issued and outstanding for at least 24 months.
(m) Nonrecognition of gain or loss on contribution of employer
securities to tax credit employee stock ownership plan
No gain or loss shall be recognized to the taxpayer with respect
to the transfer of employer securities to a tax credit employee
stock ownership plan maintained by the taxpayer to the extent that
such transfer is required under section 41(c)(1)(B), (FOOTNOTE 4)
or subparagraph (A) or (B) of section 48(n)(1). (FOOTNOTE 4)
(FOOTNOTE 4) See References in Text note below.
(n) Securities received in certain transactions
(1) In general
A plan to which section 1042 applies and an eligible
worker-owned cooperative (within the meaning of section 1042(c))
shall provide that no portion of the assets of the plan or
cooperative attributable to (or allocable in lieu of) employer
securities acquired by the plan or cooperative in a sale to which
section 1042 applies may accrue (or be allocated directly or
indirectly under any plan of the employer meeting the
requirements of section 401(a)) -
(A) during the nonallocation period, for the benefit of -
(i) any taxpayer who makes an election under section
1042(a) with respect to employer securities,,, (FOOTNOTE 5)
(FOOTNOTE 5) So in original.
(ii) any individual who is related to the taxpayer (within
the meaning of section 267(b)), or
(B) for the benefit of any other person who owns (after
application of section 318(a)) more than 25 percent of -
(i) any class of outstanding stock of the corporation which
issued such employer securities or of any corporation which
is a member of the same controlled group of corporations
(within the meaning of subsection (l)(4)) as such
corporation, or
(ii) the total value of any class of outstanding stock of
any such corporation.
For purposes of subparagraph (B), section 318(a) shall be applied
without regard to the employee trust exception in paragraph
(2)(B)(i).
(2) Failure to meet requirements
If a plan fails to meet the requirements of paragraph (1) -
(A) the plan shall be treated as having distributed to the
person described in paragraph (1) the amount allocated to the
account of such person in violation of paragraph (1) at the
time of such allocation,
(B) the provisions of section 4979A shall apply, and
(C) the statutory period for the assessment of any tax
imposed by section 4979A shall not expire before the date which
is 3 years from the later of -
(i) the 1st allocation of employer securities in connection
with a sale to the plan to which section 1042 applies, or
(ii) the date on which the Secretary is notified of such
failure.
(3) Definitions and special rules
For purposes of this subsection -
(A) Lineal descendants
Paragraph (1)(A)(ii) shall not apply to any individual if -
(i) such individual is a lineal descendant of the taxpayer,
and
(ii) the aggregate amount allocated to the benefit of all
such lineal descendants during the nonallocation period does
not exceed more than 5 percent of the employer securities (or
amounts allocated in lieu thereof) held by the plan which are
attributable to a sale to the plan by any person related to
such descendants (within the meaning of section 267(c)(4)) in
a transaction to which section 1042 applied.
(B) 25-percent shareholders
A person shall be treated as failing to meet the stock
ownership limitation under paragraph (1)(B) if such person
fails such limitation -
(i) at any time during the 1-year period ending on the date
of sale of qualified securities to the plan or cooperative,
or
(ii) on the date as of which qualified securities are
allocated to participants in the plan or cooperative.
(C) Nonallocation period
The term ''nonallocation period'' means the period beginning
on the date of the sale of the qualified securities and ending
on the later of -
(i) the date which is 10 years after the date of sale, or
(ii) the date of the plan allocation attributable to the
final payment of acquisition indebtedness incurred in
connection with such sale.
(o) Distribution and payment requirements
A plan meets the requirements of this subsection if -
(1) Distribution requirement
(A) In general
The plan provides that, if the participant and, if applicable
pursuant to sections 401(a)(11) and 417, with the consent of
the participant's spouse elects, the distribution of the
participant's account balance in the plan will commence not
later than 1 year after the close of the plan year -
(i) in which the participant separates from service by
reason of the attainment of normal retirement age under the
plan, disability, or death, or
(ii) which is the 5th plan year following the plan year in
which the participant otherwise separates from service,
except that this clause shall not apply if the participant is
reemployed by the employer before distribution is required to
begin under this clause.
(B) Exception for certain financed securities
For purposes of this subsection, the account balance of a
participant shall not include any employer securities acquired
with the proceeds of the loan described in section 404(a)(9)
until the close of the plan year in which such loan is repaid
in full.
(C) Limited distribution period
The plan provides that, unless the participant elects
otherwise, the distribution of the participant's account
balance will be in substantially equal periodic payments (not
less frequently than annually) over a period not longer than
the greater of -
(i) 5 years, or
(ii) in the case of a participant with an account balance
in excess of $800,000, 5 years plus 1 additional year (but
not more than 5 additional years) for each $160,000 or
fraction thereof by which such balance exceeds $800,000.
(2) Cost-of-living adjustment
The Secretary shall adjust the dollar amounts under paragraph
(1)(C) at the same time and in the same manner as under section
415(d).
(p) Prohibited allocations of securities in an S corporation
(1) In general
An employee stock ownership plan holding employer securities
consisting of stock in an S corporation shall provide that no
portion of the assets of the plan attributable to (or allocable
in lieu of) such employer securities may, during a nonallocation
year, accrue (or be allocated directly or indirectly under any
plan of the employer meeting the requirements of section 401(a))
for the benefit of any disqualified person.
(2) Failure to meet requirements
(A) In general
If a plan fails to meet the requirements of paragraph (1),
the plan shall be treated as having distributed to any
disqualified person the amount allocated to the account of such
person in violation of paragraph (1) at the time of such
allocation.
(B) Cross reference
For excise tax relating to violations of paragraph (1) and
ownership of synthetic equity, see section 4979A.
(3) Nonallocation year
For purposes of this subsection -
(A) In general
The term ''nonallocation year'' means any plan year of an
employee stock ownership plan if, at any time during such plan
year -
(i) such plan holds employer securities consisting of stock
in an S corporation, and
(ii) disqualified persons own at least 50 percent of the
number of shares of stock in the S corporation.
(B) Attribution rules
For purposes of subparagraph (A) -
(i) In general
The rules of section 318(a) shall apply for purposes of
determining ownership, except that -
(I) in applying paragraph (1) thereof, the members of an
individual's family shall include members of the family
described in paragraph (4)(D), and
(II) paragraph (4) thereof shall not apply.
(ii) Deemed-owned shares
Notwithstanding the employee trust exception in section
318(a)(2)(B)(i), an individual shall be treated as owning
deemed-owned shares of the individual.
Solely for purposes of applying paragraph (5), this
subparagraph shall be applied after the attribution rules of
paragraph (5) have been applied.
(4) Disqualified person
For purposes of this subsection -
(A) In general
The term ''disqualified person'' means any person if -
(i) the aggregate number of deemed-owned shares of such
person and the members of such person's family is at least 20
percent of the number of deemed-owned shares of stock in the
S corporation, or
(ii) in the case of a person not described in clause (i),
the number of deemed-owned shares of such person is at least
10 percent of the number of deemed-owned shares of stock in
such corporation.
(B) Treatment of family members
In the case of a disqualified person described in
subparagraph (A)(i), any member of such person's family with
deemed-owned shares shall be treated as a disqualified person
if not otherwise treated as a disqualified person under
subparagraph (A).
(C) Deemed-owned shares
(i) In general
The term ''deemed-owned shares'' means, with respect to any
person -
(I) the stock in the S corporation constituting employer
securities of an employee stock ownership plan which is
allocated to such person under the plan, and
(II) such person's share of the stock in such corporation
which is held by such plan but which is not allocated under
the plan to participants.
(ii) Person's share of unallocated stock
For purposes of clause (i)(II), a person's share of
unallocated S corporation stock held by such plan is the
amount of the unallocated stock which would be allocated to
such person if the unallocated stock were allocated to all
participants in the same proportions as the most recent stock
allocation under the plan.
(D) Member of family
For purposes of this paragraph, the term ''member of the
family'' means, with respect to any individual -
(i) the spouse of the individual,
(ii) an ancestor or lineal descendant of the individual or
the individual's spouse,
(iii) a brother or sister of the individual or the
individual's spouse and any lineal descendant of the brother
or sister, and
(iv) the spouse of any individual described in clause (ii)
or (iii).
A spouse of an individual who is legally separated from such
individual under a decree of divorce or separate maintenance
shall not be treated as such individual's spouse for purposes
of this subparagraph.
(5) Treatment of synthetic equity
For purposes of paragraphs (3) and (4), in the case of a person
who owns synthetic equity in the S corporation, except to the
extent provided in regulations, the shares of stock in such
corporation on which such synthetic equity is based shall be
treated as outstanding stock in such corporation and deemed-owned
shares of such person if such treatment of synthetic equity of 1
or more such persons results in -
(A) the treatment of any person as a disqualified person, or
(B) the treatment of any year as a nonallocation year.
For purposes of this paragraph, synthetic equity shall be treated
as owned by a person in the same manner as stock is treated as
owned by a person under the rules of paragraphs (2) and (3) of
section 318(a). If, without regard to this paragraph, a person is
treated as a disqualified person or a year is treated as a
nonallocation year, this paragraph shall not be construed to
result in the person or year not being so treated.
(6) Definitions
For purposes of this subsection -
(A) Employee stock ownership plan
The term ''employee stock ownership plan'' has the meaning
given such term by section 4975(e)(7).
(B) Employer securities
The term ''employer security'' has the meaning given such
term by section 409(l).
(C) Synthetic equity
The term ''synthetic equity'' means any stock option,
warrant, restricted stock, deferred issuance stock right, or
similar interest or right that gives the holder the right to
acquire or receive stock of the S corporation in the future.
Except to the extent provided in regulations, synthetic equity
also includes a stock appreciation right, phantom stock unit,
or similar right to a future cash payment based on the value of
such stock or appreciation in such value.
(7) Regulations and guidance
(A) In general
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subsection.
(B) Avoidance or evasion
The Secretary may, by regulation or other guidance of general
applicability, provide that a nonallocation year occurs in any
case in which the principal purpose of the ownership structure
of an S corporation constitutes an avoidance or evasion of this
subsection.
(q) Cross references
(1) For requirements for allowance of employee plan credit,
see section 48(n). (FOOTNOTE 6)
(FOOTNOTE 6) See References in Text note below.
(2) For assessable penalties for failure to meet requirements
of this section, or for failure to make contributions required
with respect to the allowance of an employee plan credit or
employee stock ownership credit, see section 6699. (FOOTNOTE 6)
(3) For requirements for allowance of an employee stock
ownership credit, see section 41. (FOOTNOTE 6)
Sources
(Added Pub. L. 95-600, title I, Sec. 141(a), Nov. 6, 1978, 92 Stat.
2787, Sec. 409A; amended Pub. L. 96-222, title I, Sec.
101(a)(7)(D)-(F), (I), (J), (L)(i)(VI), (ii)(I), (II), (iii)(V),
(v)(VI), (VII), Apr. 1, 1980, 94 Stat. 198-200; Pub. L. 96-605,
title II, Sec. 224(a), Dec. 28, 1980, 94 Stat. 3528; Pub. L. 97-34,
title III, Sec. 331(c)(1), 334, 336, 337(a), Aug. 13, 1981, 95
Stat. 293, 297, 298; Pub. L. 97-448, title I, Sec. 103(h), (i),
Jan. 12, 1983, 96 Stat. 2379; renumbered Sec. 409 and amended Pub.
L. 98-369, div. A, title IV, Sec. 474(r)(15), 491(e)(1), July 18,
1984, 98 Stat. 843, 852; Pub. L. 99-514, title XI, Sec. 1172(b)(1),
1174(a)(1), (b)(1), (2), (c)(1)(A), 1176(b), title XVIII, Sec.
1852(a)(4)(B), 1854(a)(3)(A), (f)(1), (3)(C), 1899A(11), Oct. 22,
1986, 100 Stat. 2514, 2516, 2517, 2520, 2865, 2873, 2881, 2882,
2958; Pub. L. 100-647, title I, Sec. 1011B(g)(1), (2), (i)(1), (3),
(j)(3), (5), (k)(3), 1018(t)(4)(B), (C), (H), Nov. 10, 1988, 102
Stat. 3490, 3492, 3493, 3588, 3589; Pub. L. 101-239, title VII,
Sec. 7304(a)(2)(A), (B), 7811(h)(1), Dec. 19, 1989, 103 Stat. 2352,
2353, 2409; Pub. L. 105-34, title XV, Sec. 1506(a), Aug. 5, 1997,
111 Stat. 1064; Pub. L. 107-16, title VI, Sec. 656(a), June 7,
2001, 115 Stat. 131.)
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.
References in Text
REFERENCES IN TEXT
Section 41, referred to in subsecs. (b)(1)(A), (4), (g),
(i)(1)(A), (m), and (p), which related to employee stock ownership
credit, was repealed by Pub. L. 99-514, title XI, Sec. 1171(a),
Oct. 22, 1986, 100 Stat. 2513. Section 30 of this title, relating
to credit for increasing research activities, was renumbered
section 41.
Section 12 of the Securities Exchange Act of 1934, referred to in
subsec. (e)(4), is classified to section 78l of Title 15, Commerce
and Trade.
Section 403(c)(1) of the Employee Retirement Income Security Act
of 1974, referred to in subsecs. (j) and (k), is classified to
section 1103(c)(1) of Title 29, Labor.
The enactment of the Tax Reform Act of 1984, referred to in
subsecs. (g) and (k), means the enactment of div. A of Pub. L.
98-369, which was approved July 18, 1984.
Subsec. (n) of section 48, referred to in subsecs. (g), (m), and
(p)(1), was repealed by section 474(o)(15) of Pub. L. 98-369.
Section 6699, referred to in subsec. (p)(2), was repealed by Pub.
L. 99-514, title XI, Sec. 1171(b)(7)(A), Oct. 22, 1986, 100 Stat.
2513.
Miscellaneous
PRIOR PROVISIONS
A prior section 409, added Pub. L. 93-406, title II, Sec.
2002(c), Sept. 2, 1974, 88 Stat. 964; amended Pub. L. 94-455, title
XV, Sec. 1501(b)(6), title XIX, Sec. 1901(a)(60), 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1736, 1774, 1834; Pub. L. 95-600, title I,
Sec. 156(c)(2), (3), 157(e)(1)(B), Nov. 6, 1978, 92 Stat. 2803,
2806; Pub. L. 96-222, title I, Sec. 101(a)(14)(B), Apr. 1, 1980, 94
Stat. 204; Pub. L. 97-34, title III, Sec. 311(g)(1)(D), (3), Aug.
13, 1981, 95 Stat. 281; Pub. L. 97-248, title II, Sec.
243(b)(1)(B), title III, Sec. 335(a)(2), Sept. 3, 1982, 96 Stat.
523, 628; Pub. L. 97-452, Sec. 2(c)(1), Jan. 12, 1983, 96 Stat.
2478; Pub. L. 98-369, div. A, title I, Sec. 42(a)(7), title V,
Sec. 522(d)(13), July 18, 1984, 98 Stat. 557, 871, related to
retirement bonds, prior to repeal by Pub. L. 98-369, div. A, title
IV, Sec. 491(b), (f)(1), July 18, 1984, 98 Stat. 848, 853,
applicable to obligations issued after Dec. 31, 1983.
AMENDMENTS
2002 - Subsec. (o)(1)(C)(ii). Pub. L. 107-147, Sec. 411(j)(2):
Section 409(o)(1)(C)(ii) is amended--
- by striking ``$500,000'' both places it appears
and inserting ``$800,000'', and
- by striking ``$100,000'' and inserting ``$160,000''.
2001 - Subsecs. (p), (q). Pub. L. 107-16, Sec. 656(a), 901,
temporarily added subsec. (p) and redesignated former subsec. (p)
as (q). See Effective and Termination Dates of 2001 Amendment note
below.
1997 - Subsec. (h)(2). Pub. L. 105-34 designated existing
provisions as subpar. (A), inserted subpar. heading, struck out
''In the case of an employer whose charter or bylaws restrict the
ownership of substantially all outstanding employer securities to
employees or to a trust described in section 401(a), a plan which
otherwise meets the requirements of this subsection or section
4975(e)(7) shall not be considered to have failed to meet the
requirements of this subsection or of section 401(a) merely because
it does not permit a participant to exercise the right described in
paragraph (1)(A) if such plan provides that participants entitled
to a distribution from the plan shall have a right to receive such
distribution in cash, except that such plan may distribute employer
securities subject to a requirement that such securities may be
resold to the employer under terms which meet the requirements of
paragraph (1)(B).'' after ''employer securities.'', and added
subpar. (B).
1989 - Subsec. (l)(5). Pub. L. 101-239, Sec. 7811(h)(1),
substituted ''the second sentence'' for ''the last sentence''.
Subsec. (n)(1). Pub. L. 101-239, Sec. 7304(a)(2)(A)(i), struck
out ''or section 2057'' after ''section 1042'' in two places in
introductory provisions.
Subsec. (n)(1)(A)(i). Pub. L. 101-239, Sec. 7304(a)(2)(A)(ii),
struck out ''or any decedent if the executor of the estate of such
decedent makes a qualified sale to which section 2057 applies''
after ''employer securities,''.
Subsec. (n)(1)(A)(ii). Pub. L. 101-239, Sec. 7304(a)(2)(A)(iii),
struck out ''or the decedent'' after ''the taxpayer''.
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 101-239, Sec.
7304(a)(2)(B), struck out ''or section 2057'' after ''section
1042''.
1988 - Subsec. (d). Pub. L. 100-647, Sec. 1011B(j)(3), inserted
''or to any distribution or reinvestment required under section
401(a)(28)'' after ''under section 401(a)(9)''.
Subsec. (e)(5). Pub. L. 100-647, Sec. 1018(t)(4)(H), substituted
''paragraph (3)'' for ''paragraph (2) or (3)''.
Subsec. (h)(2). Pub. L. 100-647, Sec. 1018(t)(4)(B), substituted
''paragraph (1)(B)'' for ''section 409(o)''.
Subsec. (h)(7). Pub. L. 100-647, Sec. 1011B(j)(5), added par.
(7).
Subsec. (l)(4), (5). Pub. L. 100-647, Sec. 1011B(k)(3),
redesignated par. (4), relating to nonvoting common stock may be
acquired in certain cases, as (5).
Subsec. (n)(1). Pub. L. 100-647, Sec. 1011B(g)(1), made technical
amendment to directory language of Pub. L. 99-514, Sec. 1172(b)(1).
See 1986 Amendment note below.
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 100-647, Sec.
1011B(g)(2), inserted ''or section 2057'' after ''which section
1042''.
Subsec. (n)(3)(C). Pub. L. 100-647, Sec. 1018(t)(4)(C), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: ''The term 'nonallocation period' means the 10-year period
beginning on the later of -
''(i) the date of the sale of the qualified securities, or
''(ii) the date of the plan allocation attributable to the
final payment of acquisition indebtedness incurred in connection
with such sale.''
Subsec. (o)(1)(A). Pub. L. 100-647, Sec. 1011B(i)(3), substituted
''if the participant and, if applicable pursuant to sections
401(a)(11) and 417, with the consent of the participant's spouse
elects'' for ''unless the participant otherwise elects''.
Subsec. (o)(1)(A)(ii). Pub. L. 100-647, Sec. 1011B(i)(1),
substituted ''distribution is required to begin under this clause''
for ''such year''.
1986 - Subsec. (a)(3). Pub. L. 99-514, Sec. 1174(b)(2), inserted
reference to subsec. (o).
Subsec. (d). Pub. L. 99-514, Sec. 1899A(11), substituted
''participant's'' for ''participants's''.
Pub. L. 99-514, Sec. 1852(a)(4)(B), inserted at end ''This
subsection shall not apply to any distribution required under
section 401(a)(9).''
Subsec. (d)(1). Pub. L. 99-514, Sec. 1174(a)(1), substituted
''separation from service, or termination of the plan'' for ''or
separation from service''.
Subsec. (e)(2). Pub. L. 99-514, Sec. 1854(f)(1)(C), (D), inserted
''or beneficiary'' after ''participant'' in two places and
substituted ''securities of the employer'' for ''employer
securities''.
Subsec. (e)(3). Pub. L. 99-514, Sec. 1854(f)(1)(B)-(D), inserted
''or beneficiary'' after ''participant'' in two places and
substituted ''securities of the employer'' for ''employer
securities'' and ''any corporate matter which involves the voting
of such shares with respect to the approval or disapproval of any
corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially
all assets of a trade or business, or such similar transaction as
the Secretary may prescribe in regulations'' for ''a corporate
matter which (by law or charter) must be decided by more than a
majority vote of outstanding common shares voted''.
Subsec. (e)(5). Pub. L. 99-514, Sec. 1854(f)(1)(A), added par.
(5).
Subsec. (h)(2). Pub. L. 99-514, Sec. 1854(f)(3)(C), inserted '',
except that such plan may distribute employer securities subject to
a requirement that such securities may be resold to the employer
under terms which meet the requirements of section 409(o)''.
Subsec. (h)(5), (6). Pub. L. 99-514, Sec. 1174(c)(1)(A), added
pars. (5) and (6).
Subsec. (l)(4). Pub. L. 99-514, Sec. 1176(b), added par. (4)
relating to acquisition of nonvoting common stock.
Subsec. (n). Pub. L. 99-514, Sec. 1854(a)(3)(A), added subsec.
(n). Former subsec. (n) redesignated (o).
Subsec. (n)(1). Pub. L. 99-514, Sec. 1172(b)(1), as amended by
Pub. L. 100-647, Sec. 1011B(g)(1), inserted ''or section 2057'' in
two places in introductory provisions, ''or any decedent if the
executor of the estate of such decedent makes a qualified sale to
which section 2057 applies,'' in subpar. (A)(i), and ''or the
decedent'' in subpar. (A)(ii).
Subsec. (o). Pub. L. 99-514, Sec. 1174(b)(1), added subsec. (o).
Former subsec. (o) redesignated (p).
Pub. L. 99-514, Sec. 1854(a)(3)(A), redesignated former subsec.
(n) as (o).
Subsec. (p). Pub. L. 99-514, Sec. 1174(b)(1), redesignated former
subsec. (o) as (p).
1984 - Subsec. (b)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A),
(B), substituted ''41'' for ''44G'' and struck out ''48(n)(1)(A)
or'' after ''requirements of section''.
Subsec. (b)(4). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
''41'' for ''44G''.
Subsec. (g). Pub. L. 98-369, Sec. 474(r)(15)(A), (C), substituted
''41'' for ''44G'' in two places, and inserted provision directing
that, for purposes of the preceding sentence, the references to
section 48(n)(1) and the employee plan credit shall refer to such
section and credit as in effect before the enactment of the Tax
Reform Act of 1984.
Subsec. (i)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A), (D),
substituted ''41'' for ''44G'', and struck out ''48(n)(1) or''
after ''taxable year under section''.
Subsec. (k). Pub. L. 98-369, Sec. 474(r)(15)(E), inserted
provision requiring that, for purposes of this subsection, the
reference to the matching employee plan credit refer to such credit
as in effect before the enactment of the Tax Reform Act of 1984.
Subsec. (m). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
''41'' for ''44G''.
Subsec. (n)(3). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
''41'' for ''44G''.
1983 - Subsec. (d)(2). Pub. L. 97-448, Sec. 103(i), struck out
provisions covering the sale of substantially all of the stock of a
subsidiary of the employer.
Subsec. (h)(2). Pub. L. 97-448, Sec. 103(h), substituted ''the
requirements of this subsection or of section 401(a)'' for ''the
requirements of section 401(a)''.
1981 - Subsec. (b). Pub. L. 97-34, Sec. 331(c)(1)(A), (B),
inserted in par. (1)(A) reference to section 44G(c)(1)(B), and
inserted in par. (4) ''or the credit allowed under section 44G
(relating to the employee stock ownership credit)'' after ''basic
employee plan credit''.
Subsec. (d). Pub. L. 97-34, Sec. 337, designated provision
relating to death, disability, or separation from service as par.
(1) and added pars. (2) and (3).
Subsec. (g). Pub. L. 97-34, Sec. 331(c)(1)(C), (D), inserted
reference to section 44G(c)(1)(B) and inserted ''or the credit
allowed under section 44G (relating to employee stock ownership
credit)'' after ''employee plan credit''.
Subsec. (h)(2). Pub. L. 97-34, Sec. 334, substituted ''this
subsection'' for ''this section'' and inserted provision respecting
receipt of distributions in cash where employer's charter or bylaws
restrict ownership of substantially all outstanding employer
securities to employees or to a section 401(a) trust where a
participant is not permitted to exercise the right described in
par. (1)(A).
Subsec. (h)(3), (4). Pub. L. 97-34, Sec. 336, added pars. (3) and
(4).
Subsec. (i)(1)(A). Pub. L. 97-34, Sec. 331(c)(1)(E), inserted
reference to section 44G(c)(1)(B).
Subsec. (m). Pub. L. 97-34, Sec. 331(c)(1)(F), inserted reference
to section 44G(c)(1)(B).
Subsec. (n)(2), (3). Pub. L. 97-34, Sec. 331(c)(1)(G), (H),
inserted ''or employee stock ownership credit'' after ''employee
plan credit'' in par. (2) and added par. (3).
1980 - Pub. L. 96-222, Sec. 101(a)(7)(L)(v)(VII), substituted
''tax credit employee stock ownership plans'' for ''ESOPS'' in
section catchline.
Subsec. (a). Pub. L. 96-222, Sec. 101(a)(7)(L)(ii)(I), (v)(VI),
substituted in heading and in text ''tax credit employee stock
ownership plan'' for ''ESOP''.
Subsec. (b)(4). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted ''employee plan credit'' for ''ESOP credit''.
Subsec. (d). Pub. L. 96-222, Sec. 101(a)(7)(F), inserted ''(or
allocated to a participant's account in connection with matched
employer and employee contributions)'' after ''under subsection
(b)''.
Subsec. (f)(1). Pub. L. 96-222, Sec. 101(a)(7)(I)(i), substituted
''only if it is established on or before the due date (including
any extension of such date) for the filing of the employer's tax
return for the first taxable year of the employer for which an
employee plan credit is claimed by the employer with respect to the
plan'' for ''for a plan year only if it is established on or before
the due date for the filing of the employer's tax return for the
taxable year (including any extension of such date) in which or
with which the plan year ends''.
Subsec. (f)(2). Pub. L. 96-222, Sec. 101(a)(7)(I)(ii),
(L)(v)(VII), substituted ''employee plan'' for ''ESOP'' and
inserted ''with respect to the plan'' after ''by the employer''.
Subsec. (g). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted ''employee plan credit'' for ''ESOP credit''.
Subsec. (h)(2). Pub. L. 96-222, Sec. 101(a)(7)(E), inserted ''or
of section 4975(e)(7)'' after ''the requirements of this section''.
Subsecs. (j)(2), (k)(1). Pub. L. 96-222, Sec.
101(a)(7)(L)(iii)(V), substituted ''employee plan credit'' for
''ESOP credit''.
Subsec. (l)(2)(B). Pub. L. 96-222, Sec. 101(a)(7)(J)(i),
substituted ''class of common stock'' for ''class of stock''.
Subsec. (l)(3). Pub. L. 96-222, Sec. 101(a)(7)(J)(ii),
(L)(ii)(II), substituted ''as employer securities'' for ''as
meeting the requirements of paragraph (1)'', ''paragraph (1) or
(2)'' for ''paragraph (2)'', and ''tax credit employee stock
ownership plan'' for ''ESOP'' and inserted provisions requiring
preferred stock to be treated as noncallable if after the call
there will be a reasonable opportunity for a conversion which meets
the requirements of the preceding sentence.
Subsec. (l)(4). Pub. L. 96-605 substituted in heading
''Application to controlled group of corporations'' for
''Controlled group of corporations defined'' and in subpar. (B)
heading ''Where common parent owns at least'' for ''Common parent
may own only'' and added subpar. (C).
Subsec. (m). Pub. L. 96-222, Sec. 101(a)(7)(D), (L)(i),
substituted provisions relating to nonrecognition of gain or loss
on contribution of employer securities to a tax credit employee
stock ownership plan for provisions relating to contributions of
stock of a controlling corporation.
Subsec. (n). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted ''employee plan credit'' for ''ESOP credit'' in pars.
(1) and (2).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 656(d), June 7, 2001, 115 Stat.
135, provided that:
''(1) In general. - The amendments made by this section (amending
this section and sections 4975 and 4979A of this title) shall apply
to plan years beginning after December 31, 2004.
''(2) Exception for certain plans. - In the case of any -
''(A) employee stock ownership plan established after March 14,
2001, or
''(B) employee stock ownership plan established on or before
such date if employer securities held by the plan consist of
stock in a corporation with respect to which an election under
section 1362(a) of the Internal Revenue Code of 1986 is not in
effect on such date,
the amendments made by this section shall apply to plan years
ending after March 14, 2001.''
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 1997 AMENDMENT
Section 1506(c) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section, section 4975 of this
title, and section 1108 of Title 29, Labor) shall apply to taxable
years beginning after December 31, 1997.''
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7304(a)(3) of Pub. L. 101-239 provided that: ''The
amendments made by this subsection (amending this section and
sections 4978 and 4979A of this title and repealing sections 2057
and 4978A of this title) shall apply to the estates of decedents
dying after the date of the enactment of this Act (Dec. 19,
1989).''
Amendment by section 7811(h)(1) 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.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1172(c) of Pub. L. 99-514 provided that: ''The amendments
made by this section (enacting section 2057 of this title and
amending this section and section 4979A of this title) shall apply
to sales after the date of the enactment of this Act (Oct. 22,
1986) with respect to which an election is made by the executor of
an estate who is required to file the return of the tax imposed by
the Internal Revenue Code of 1986 on a date (including extensions)
after the date of the enactment of this Act.''
Section 1174(a)(2) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1011B(i)(2), Nov. 10, 1988, 102 Stat. 3492,
provided that: ''The amendment made by this subsection (amending
this section) shall apply to distributions after December 31,
1984.''
Section 1174(b)(3) of Pub. L. 99-514 provided that: ''The
amendments made by this subsection (amending this section) shall
apply to distributions attributable to stock acquired after
December 31, 1986.''
Section 1174(c)(1)(B) of Pub. L. 99-514 provided that: ''The
amendment made by this paragraph (amending this section) shall
apply to distributions attributable to stock acquired after
December 31, 1986, except that a plan may elect to have such
amendment apply to all distributions after the date of the
enactment of this Act (Oct. 22, 1986).''
Amendment by section 1176(b) of Pub. L. 99-514 applicable to
acquisitions of securities after Dec. 31, 1986, see section 1176(c)
of Pub. L. 99-514, set out as a note under section 401 of this
title.
Amendment by section 1852(a)(4)(B) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
Section 1854(a)(3)(C) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(t)(4)(G), Nov. 10, 1988, 102 Stat.
3588, provided that:
''(i) Except as provided in clause (ii), the amendments made by
this paragraph (amending this section and section 1042 of this
title) shall apply to sales of securities after the date of the
enactment of this Act (Oct. 22, 1986).
''(ii) A taxpayer or executor may elect to have section
1042(b)(3) of the Internal Revenue Code of 1954 (as in effect
before the amendment made by subparagraph (B)) apply to sales
before the date of the enactment of this Act as if such section
included the last sentence of section 409(n)(1) of the Internal
Revenue Code of 1986 (as added by subparagraph (A)).''
Section 1854(f)(4)(A), (B) of Pub. L. 99-514 provided that:
''(A) The amendments made by paragraph (1)(A) and (3) (amending
this section and sections 1042 and 4975 of this title) shall take
effect on the date of the enactment of this Act (Oct. 22, 1986).''
''(B) The amendments made by subparagraphs (B), (C), and (D) of
paragraph (1) (amending this section) shall apply after December
31, 1986, to stock acquired after December 31, 1979.''
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(15) of Pub. L. 98-369 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 a note
under section 21 of this title.
Redesignation of section 409A as 409 by section 491(e)(1) of Pub.
L. 98-369 effective Jan. 1, 1984, see section 491(f)(3) of Pub. L.
98-369, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 331(c)(1) of Pub. L. 97-34 applicable to
taxable years ending after Dec. 31, 1982, see section 331(f)(2) of
Pub. L. 97-34, set out as a note under section 404 of this title.
Section 337(b) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''The
amendments made by this section (amending this section) shall apply
to distributions described in section 409A(d) of the Internal
Revenue Code of 1986 (formerly I.R.C. 1954) (or any corresponding
provision of prior law) made after March 29, 1975.''
Amendment by sections 334 and 336 of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1981, see section 339 of
Pub. L. 97-34, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 224(b) of Pub. L. 96-605 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to qualified investment for taxable years beginning after
December 31, 1978.''
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE
Section 141(g) of Pub. L. 95-600, as added by Pub. L. 96-222,
title I, Sec. 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; amended by
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
''(1) In general. - Except as otherwise provided in this
subsection and subsection (h) (set out as an Effective Date of 1978
Amendment note under section 4975 of this title), the amendments
made by this section (enacting sections 409A (now 409) and 6699 of
this title and amending sections 46, 48, 56, 401, 404, 415, 805,
1504, and 4975 of this title) shall apply with respect to qualified
investment for taxable years beginning after December 31, 1978.
''(2) Election to have amendments apply during 1978. - At the
election of the taxpayer, paragraph (1) shall be applied by
substituting 'December 31, 1977' for 'December 31, 1978'; except
that in the case of a plan in existence before December 31, 1978,
any such election shall not affect the required allocation of
employer securities attributable to qualified investment for
taxable years beginning before January 1, 1979. An election under
the preceding sentence shall be made at such time and in such
manner as the Secretary of the Treasury or his delegate shall
prescribe. Such an election, once made, shall be irrevocable.
''(3) Voting right provisions. - Section 409A(e) of the Internal
Revenue Code of 1986 (formerly I.R.C. 1954) (as added by subsection
(a)) (now section 409) shall apply to plans to which section 409A
of such Code applies, beginning with the first day of such
application.
''(4) Right to demand employer securities, etc. - Paragraphs
(1)(A) and (2) of section 409A(h) of the Internal Revenue Code of
1986 (as added by subsection (a)) (now section 409) shall apply to
distributions after December 31, 1978, made by a plan to which
section 409A of such Code applies.
''(5) Subsection (f)(7). - The amendment made by subsection
(f)(7) (amending section 415 of this title) shall apply to years
beginning after December 31, 1978.
''(6) Retroactive application of amendment made by subsection
(d). - In determining the regular tax deduction under section 56(c)
of the Internal Revenue Code of 1986 for any taxable year beginning
before January 1, 1979, the amount of the credit allowable under
section 38 of such Code shall be determined without regard to
section 46(a)(2)(B) of such Code (as in effect before the enactment
of the Energy Tax Act of 1978 (Nov. 9, 1978)).''
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 404, 411, 414, 415,
512, 664, 1042, 4975, 4978, 4979A, 4980 of this title; title 28
section 3010; title 29 sections 1054, 1055.
