Internal Revenue Code:Sec. 512. Unrelated business taxable income
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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 F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
Statute
Sec. 512. Unrelated business taxable income
(a) Definition
For purposes of this title -
(1) General rule
Except as otherwise provided in this subsection, the term
''unrelated business taxable income'' means the gross income
derived by any organization from any unrelated trade or business
(as defined in section 513) regularly carried on by it, less the
deductions allowed by this chapter which are directly connected
with the carrying on of such trade or business, both computed
with the modifications provided in subsection (b).
(2) Special rule for foreign organizations
In the case of an organization described in section 511 which
is a foreign organization, the unrelated business taxable income
shall be -
(A) its unrelated business taxable income which is derived
from sources within the United States and which is not
effectively connected with the conduct of a trade or business
within the United States, plus
(B) its unrelated business taxable income which is
effectively connected with the conduct of a trade or business
within the United States.
(3) Special rules applicable to organizations described in
paragraph (7), (9), (17), or (20) of section 501(c)
(A) General rule
In the case of an organization described in paragraph (7),
(9), (17), or (20) of section 501(c), the term ''unrelated
business taxable income'' means the gross income (excluding any
exempt function income), less the deductions allowed by this
chapter which are directly connected with the production of the
gross income (excluding exempt function income), both computed
with the modifications provided in paragraphs (6), (10), (11),
and (12) of subsection (b). For purposes of the preceding
sentence, the deductions provided by sections 243, 244, and 245
(relating to dividends received by corporations) shall be
treated as not directly connected with the production of gross
income.
(B) Exempt function income
For purposes of subparagraph (A), the term ''exempt function
income'' means the gross income from dues, fees, charges, or
similar amounts paid by members of the organization as
consideration for providing such members or their dependents or
guests goods, facilities, or services in furtherance of the
purposes constituting the basis for the exemption of the
organization to which such income is paid. Such term also
means all income (other than an amount equal to the gross
income derived from any unrelated trade or business regularly
carried on by such organization computed as if the organization
were subject to paragraph (1)), which is set aside -
(i) for a purpose specified in section 170(c)(4), or
(ii) in the case of an organization described in paragraph
(9), (17), or (20) of section 501(c), to provide for the
payment of life, sick, accident, or other benefits,
including reasonable costs of administration directly connected
with a purpose described in clause (i) or (ii). If during the
taxable year, an amount which is attributable to income so set
aside is used for a purpose other than that described in clause
(i) or (ii), such amount shall be included, under subparagraph
(A), in unrelated business taxable income for the taxable year.
(C) Applicability to certain corporations described in section
501(c)(2)
In the case of a corporation described in section 501(c)(2),
the income of which is payable to an organization described in
paragraph (7), (9), (17), or (20) of section 501(c),
subparagraph (A) shall apply as if such corporation were the
organization to which the income is payable. For purposes of
the preceding sentence, such corporation shall be treated as
having exempt function income for a taxable year only if it
files a consolidated return with such organization for such
year.
(D) Nonrecognition of gain
If property used directly in the performance of the exempt
function of an organization described in paragraph (7), (9),
(17), or (20) of section 501(c) is sold by such organization,
and within a period beginning 1 year before the date of such
sale, and ending 3 years after such date, other property is
purchased and used by such organization directly in the
performance of its exempt function, gain (if any) from such
sale shall be recognized only to the extent that such
organization's sales price of the old property exceeds the
organization's cost of purchasing the other property. For
purposes of this subparagraph, the destruction in whole or in
part, theft, seizure, requisition, or condemnation of property,
shall be treated as the sale of such property, and rules
similar to the rules provided by subsections (b), (c), (e), and
(j) of section 1034 (as in effect on the day before the date of
the enactment of the Taxpayer Relief Act of 1997) shall apply.
(E) Limitation on amount of setaside in the case of
organizations described in paragraph (9), (17), or (20) of
section 501(c)
(i) In general
In the case of any organization described in paragraph (9),
(17), or (20) of section 501(c), a set-aside for any purpose
specified in clause (ii) of subparagraph (B) may be taken
into account under subparagraph (B) only to the extent that
such set-aside does not result in an amount of assets set
aside for such purpose in excess of the account limit
determined under section 419A (without regard to subsection
(f)(6) thereof) for the taxable year (not taking into account
any reserve described in section 419A(c)(2)(A) for
post-retirement medical benefits).
(ii) Treatment of existing reserves for post-retirement
medical or life insurance benefits
(I) Clause (i) shall not apply to any income attributable
to an existing reserve for post-retirement medical or life
insurance benefits.
(II) For purposes of subclause (I), the term ''reserve
for post-retirement medical or life insurance benefits''
means the greater of the amount of assets set aside for
purposes of post-retirement medical or life insurance
benefits to be provided to covered employees as of the
close of the last plan year ending before the date of the
enactment of the Tax Reform Act of 1984 or on July 18,
1984.
(III) All payments during plan years ending on or after
the date of the enactment of the Tax Reform Act of 1984 of
post-retirement medical benefits or life insurance benefits
shall be charged against the reserve referred to in
subclause (II). Except to the extent provided in
regulations prescribed by the Secretary, all plans of an
employer shall be treated as 1 plan for purposes of the
preceding sentence.
(iii) Treatment of tax exempt organizations
This subparagraph shall not apply to any organization if
substantially all of the contributions to such organization
are made by employers who were exempt from tax under this
chapter throughout the 5-taxable year period ending with the
taxable year in which the contributions are made.
(4) Special rule applicable to organizations described in section
501(c)(19)
In the case of an organization described in section 501(c)(19),
the term ''unrelated business taxable income'' does not include
any amount attributable to payments for life, sick, accident, or
health insurance with respect to members of such organizations or
their dependents which is set aside for the purpose of providing
for the payment of insurance benefits or for a purpose specified
in section 170(c)(4). If an amount set aside under the preceding
sentence is used during the taxable year for a purpose other than
a purpose described in the preceding sentence, such amount shall
be included, under paragraph (1), in unrelated business taxable
income for the taxable year.
(5) Definition of payments with respect to securities loans
(A) The term ''payments with respect to securities loans''
includes all amounts received in respect of a security (as
defined in section 1236(c)) transferred by the owner to another
person in a transaction to which section 1058 applies (whether
or not title to the security remains in the name of the lender)
including -
(i) amounts in respect of dividends, interest, or other
distributions,
(ii) fees computed by reference to the period beginning
with the transfer of securities by the owner and ending with
the transfer of identical securities back to the transferor
by the transferee and the fair market value of the security
during such period,
(iii) income from collateral security for such loan, and
(iv) income from the investment of collateral security.
(B) Subparagraph (A) shall apply only with respect to
securities transferred pursuant to an agreement between the
transferor and the transferee which provides for -
(i) reasonable procedures to implement the obligation of
the transferee to furnish to the transferor, for each
business day during such period, collateral with a fair
market value not less than the fair market value of the
security at the close of business on the preceding business
day,
(ii) termination of the loan by the transferor upon notice
of not more than 5 business days, and
(iii) return to the transferor of securities identical to
the transferred securities upon termination of the loan.
(b) Modifications
The modifications referred to in subsection (a) are the
following:
(1) There shall be excluded all dividends, interest, payments
with respect to securities loans (as defined in subsection
(a)(5)), amounts received or accrued as consideration for
entering into agreements to make loans, and annuities, and all
deductions directly connected with such income.
(2) There shall be excluded all royalties (including overriding
royalties) whether measured by production or by gross or taxable
income from the property, and all deductions directly connected
with such income.
(3) In the case of rents -
(A) Except as provided in subparagraph (B), there shall be
excluded -
(i) all rents from real property (including property
described in section 1245(a)(3)(C)), and
(ii) all rents from personal property (including for
purposes of this paragraph as personal property any property
described in section 1245(a)(3)(B)) leased with such real
property, if the rents attributable to such personal property
are an incidental amount of the total rents received or
accrued under the lease, determined at the time the personal
property is placed in service.
(B) Subparagraph (A) shall not apply -
(i) if more than 50 percent of the total rent received or
accrued under the lease is attributable to personal property
described in subparagraph (A)(ii), or
(ii) if the determination of the amount of such rent
depends in whole or in part on the income or profits derived
by any person from the property leased (other than an amount
based on a fixed percentage or percentages of receipts or
sales).
(C) There shall be excluded all deductions directly connected
with rents excluded under subparagraph (A).
(4) Notwithstanding paragraph (1), (2), (3), or (5), in the
case of debt-financed property (as defined in section 514) there
shall be included, as an item of gross income derived from an
unrelated trade or business, the amount ascertained under section
514(a)(1), and there shall be allowed, as a deduction, the amount
ascertained under section 514(a)(2).
(5) There shall be excluded all gains or losses from the sale,
exchange, or other disposition of property other than -
(A) stock in trade or other property of a kind which would
properly be includible in inventory if on hand at the close of
the taxable year, or
(B) property held primarily for sale to customers in the
ordinary course of the trade or business.
There shall also be excluded all gains or losses recognized, in
connection with the organization's investment activities, from
the lapse or termination of options to buy or sell securities (as
defined in section 1236(c)) or real property and all gains or
losses from the forfeiture of good-faith deposits (that are
consistent with established business practice) for the purchase,
sale, or lease of real property in connection with the
organization's investment activities. This paragraph shall not
apply with respect to the cutting of timber which is considered,
on the application of section 631, as a sale or exchange of such
timber.
(6) The net operating loss deduction provided in section 172
shall be allowed, except that -
(A) the net operating loss for any taxable year, the amount
of the net operating loss carryback or carryover to any taxable
year, and the net operating loss deduction for any taxable year
shall be determined under section 172 without taking into
account any amount of income or deduction which is excluded
under this part in computing the unrelated business taxable
income; and
(B) the terms ''preceding taxable year'' and ''preceding
taxable years'' as used in section 172 shall not include any
taxable year for which the organization was not subject to the
provisions of this part.
(7) There shall be excluded all income derived from research
for (A) the United States, or any of its agencies or
instrumentalities, or (B) any State or political subdivision
thereof; and there shall be excluded all deductions directly
connected with such income.
(8) In the case of a college, university, or hospital, there
shall be excluded all income derived from research performed for
any person, and all deductions directly connected with such
income.
(9) In the case of an organization operated primarily for
purposes of carrying on fundamental research the results of which
are freely available to the general public, there shall be
excluded all income derived from research performed for any
person, and all deductions directly connected with such income.
(10) In the case of any organization described in section
511(a), the deduction allowed by section 170 (relating to
charitable etc. contributions and gifts) shall be allowed
(whether or not directly connected with the carrying on of the
trade or business), but shall not exceed 10 percent of the
unrelated business taxable income computed without the benefit of
this paragraph.
(11) In the case of any trust described in section 511(b), the
deduction allowed by section 170 (relating to charitable etc.
contributions and gifts) shall be allowed (whether or not
directly connected with the carrying on of the trade or
business), and for such purpose a distribution made by the trust
to a beneficiary described in section 170 shall be considered as
a gift or contribution. The deduction allowed by this paragraph
shall be allowed with the limitations prescribed in section
170(b)(1)(A) and (B) determined with reference to the unrelated
business taxable income computed without the benefit of this
paragraph (in lieu of with reference to adjusted gross income).
(12) Except for purposes of computing the net operating loss
under section 172 and paragraph (6), there shall be allowed a
specific deduction of $1,000. In the case of a diocese, province
of a religious order, or a convention or association of churches,
there shall also be allowed, with respect to each parish,
individual church, district, or other local unit, a specific
deduction equal to the lower of -
(A) $1,000, or
(B) the gross income derived from any unrelated trade or
business regularly carried on by such local unit.
(13) Special rules for certain amounts received from controlled
entities. -
(A) In general. - If an organization (in this paragraph
referred to as the ''controlling organization'') receives or
accrues (directly or indirectly) a specified payment from
another entity which it controls (in this paragraph referred to
as the ''controlled entity''), notwithstanding paragraphs (1),
(2), and (3), the controlling organization shall include such
payment as an item of gross income derived from an unrelated
trade or business to the extent such payment reduces the net
unrelated income of the controlled entity (or increases any net
unrelated loss of the controlled entity). There shall be
allowed all deductions of the controlling organization directly
connected with amounts treated as derived from an unrelated
trade or business under the preceding sentence.
(B) Net unrelated income or loss. - For purposes of this
paragraph -
(i) Net unrelated income. - The term ''net unrelated
income'' means -
(I) in the case of a controlled entity which is not
exempt from tax under section 501(a), the portion of such
entity's taxable income which would be unrelated business
taxable income if such entity were exempt from tax under
section 501(a) and had the same exempt purposes as the
controlling organization, or
(II) in the case of a controlled entity which is exempt
from tax under section 501(a), the amount of the unrelated
business taxable income of the controlled entity.
(ii) Net unrelated loss. - The term ''net unrelated loss''
means the net operating loss adjusted under rules similar to
the rules of clause (i).
(C) Specified payment. - For purposes of this paragraph, the
term ''specified payment'' means any interest, annuity,
royalty, or rent.
(D) Definition of control. - For purposes of this paragraph -
(i) Control. - The term ''control'' means -
(I) in the case of a corporation, ownership (by vote or
value) of more than 50 percent of the stock in such
corporation,
(II) in the case of a partnership, ownership of more than
50 percent of the profits interests or capital interests in
such partnership, or
(III) in any other case, ownership of more than 50
percent of the beneficial interests in the entity.
(ii) Constructive ownership. - Section 318 (relating to
constructive ownership of stock) shall apply for purposes of
determining ownership of stock in a corporation. Similar
principles shall apply for purposes of determining ownership
of interests in any other entity.
(E) Paragraph to apply only to certain excess payments.--
(i) <<NOTE: Applicability.>> In general.--
Subparagraph (A) shall apply only to the portion
of a qualifying specified payment received or
accrued by the controlling organization that
exceeds the amount which would have been paid or
accrued if such payment met the requirements
prescribed under section 482.
(ii) Addition to tax for valuation
misstatements.--The tax imposed by this chapter on
the controlling organization shall be increased by
an amount equal to 20 percent of the larger of--
(I) such excess determined without
regard to any amendment or supplement to
a return of tax, or
(II) such excess determined with
regard to all such amendments and
supplements.
(iii) Qualifying specified payment.--The
term `qualifying specified payment' means a
specified payment which is made pursuant to--
(I) a binding written contract in
effect on the date of the enactment of
this subparagraph, or
(II) a contract which is a
renewal, under substantially similar
terms, of a contract described in
subclause (I).
(iv) Termination.--This subparagraph shall
not apply to payments received or accrued after
December 31, 2007.
(F) Related persons. - The Secretary shall prescribe such
rules as may be necessary or appropriate to prevent avoidance
of the purposes of this paragraph through the use of related
persons.
((14) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(23),
Nov. 5, 1990, 104 Stat. 1388-521.)
(15) Except as provided in paragraph (4), in the case of a
trade or business -
(A) which consists of providing services under license issued
by a Federal regulatory agency,
(B) which is carried on by a religious order or by an
educational organization described in section 170(b)(1)(A)(ii)
maintained by such religious order, and which was so carried on
before May 27, 1959, and
(C) less than 10 percent of the net income of which for each
taxable year is used for activities which are not related to
the purpose constituting the basis for the religious order's
exemption,
there shall be excluded all gross income derived from such trade
or business and all deductions directly connected with the
carrying on of such trade or business, so long as it is
established to the satisfaction of the Secretary that the rates
or other charges for such services are competitive with rates or
other charges charged for similar services by persons not exempt
from taxation.
(16)(A) Notwithstanding paragraph (5)(B), there shall be
excluded all gains or losses from the sale, exchange, or other
disposition of any real property described in subparagraph (B) if
-
(i) such property was acquired by the organization from -
(I) a financial institution described in section 581 or
591(a) which is in conservatorship or receivership, or
(II) the conservator or receiver of such an institution (or
any government agency or corporation succeeding to the rights
or interests of the conservator or receiver),
(ii) such property is designated by the organization within
the 9-month period beginning on the date of its acquisition as
property held for sale, except that not more than one-half (by
value determined as of such date) of property acquired in a
single transaction may be so designated,
(iii) such sale, exchange, or disposition occurs before the
later of -
(I) the date which is 30 months after the date of the
acquisition of such property, or
(II) the date specified by the Secretary in order to assure
an orderly disposition of property held by persons described
in subparagraph (A), and
(iv) while such property was held by the organization, the
aggregate expenditures on improvements and development
activities included in the basis of the property are (or were)
not in excess of 20 percent of the net selling price of such
property.
(B) Property is described in this subparagraph if it is real
property which -
(i) was held by the financial institution at the time it
entered into conservatorship or receivership, or
(ii) was foreclosure property (as defined in section
514(c)(9)(H)(v)) which secured indebtedness held by the
financial institution at such time.
For purposes of this subparagraph, real property includes an
interest in a mortgage.
(17) Treatment of certain amounts derived from foreign
corporations. -
(A) In general. - Notwithstanding paragraph (1), any amount
included in gross income under section 951(a)(1)(A) shall be
included as an item of gross income derived from an unrelated
trade or business to the extent the amount so included is
attributable to insurance income (as defined in section 953)
which, if derived directly by the organization, would be
treated as gross income from an unrelated trade or business.
There shall be allowed all deductions directly connected with
amounts included in gross income under the preceding sentence.
(B) Exception. -
(i) In general. - Subparagraph (A) shall not apply to
income attributable to a policy of insurance or reinsurance
with respect to which the person (directly or indirectly)
insured is -
(I) such organization,
(II) an affiliate of such organization which is exempt
from tax under section 501(a), or
(III) a director or officer of, or an individual who
(directly or indirectly) performs services for, such
organization or affiliate but only if the insurance covers
primarily risks associated with the performance of services
in connection with such organization or affiliate.
(ii) Affiliate. - For purposes of this subparagraph -
(I) In general. - The determination as to whether an
entity is an affiliate of an organization shall be made
under rules similar to the rules of section 168(h)(4)(B).
(II) Special rule. - Two or more organizations (and any
affiliates of such organizations) shall be treated as
affiliates if such organizations are colleges or
universities described in section 170(b)(1)(A)(ii) or
organizations described in section 170(b)(1)(A)(iii) and
participate in an insurance arrangement that provides for
any profits from such arrangement to be returned to the
policyholders in their capacity as such.
(C) Regulations. - The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this paragraph, including regulations for the
application of this paragraph in the case of income paid
through 1 or more entities or between 2 or more chains of
entities.
(18) Treatment of mutual or cooperative electric
companies.--In the case of a mutual or cooperative electric
company described in section 501(c)(12), there shall be excluded
income which is treated as member income under subparagraph (H)
thereof.
(19) Treatment of gain or loss on sale or exchange of
certain brownfield sites.--
(A) In general.--Notwithstanding paragraph (5)(B),
there shall be excluded any gain or loss from the
qualified sale, exchange, or other disposition of any
qualifying brownfield property by an eligible taxpayer.
(B) Eligible taxpayer.--For purposes of this
paragraph--
(i) In general.--The term `eligible
taxpayer' means, with respect to a property, any
organization exempt from tax under section 501(a)
which--
(I) acquires from an unrelated
person a qualifying brownfield property,
and
(II) pays or incurs eligible
remediation expenditures with respect to
such property in an amount which exceeds
the greater of $550,000 or 12 percent of
the fair market value of the property at
the time such property was acquired by
the eligible taxpayer, determined as if
there was not a presence of a hazardous
substance, pollutant, or contaminant on
the property which is complicating the
expansion, redevelopment, or reuse of
the property.
(ii) Exception.--Such term shall not include
any organization which is--
(I) potentially liable under
section 107 of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980 with respect
to the qualifying brownfield property,
(II) affiliated with any other
person which is so potentially liable
through any direct or indirect familial
relationship or any contractual,
corporate, or financial relationship
(other than a contractual, corporate, or
financial relationship which is created
by the instruments by which title to any
qualifying brownfield property is
conveyed or financed or by a contract of
sale of goods or services), or
(III) the result of a
reorganization of a business entity
which was so potentially liable.
(C) Qualifying brownfield property.--For purposes
of this paragraph--
(i) In general.--The term `qualifying
brownfield property' means any real property which
is certified, before the taxpayer incurs any
eligible remediation
expenditures (other than to obtain a Phase I
environmental site assessment), by an appropriate
State agency (within the meaning of section
198(c)(4)) in the State in which such property is
located as a brownfield site within the meaning of
section 101(39) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980
(as in effect on the date of the enactment of this
paragraph).
(ii) Request for certification.--Any request
by an eligible taxpayer for a certification
described in clause (i) shall include a sworn
statement by the eligible taxpayer and supporting
documentation of the presence of a hazardous
substance, pollutant, or contaminant on the
property which is complicating the expansion,
redevelopment, or reuse of the property given the
property's reasonably anticipated future land uses
or capacity for uses of the property (including a
Phase I environmental site assessment and, if
applicable, evidence of the property's presence on
a local, State, or Federal list of brownfields or
contaminated property) and other environmental
assessments prepared or obtained by the taxpayer.
(D) Qualified sale, exchange, or other
disposition.--For purposes of this paragraph--
(i) In general.--A sale, exchange, or other
disposition of property shall be considered as
qualified if--
(I) such property is transferred
by the eligible taxpayer to an unrelated
person, and
(II) within 1 year of such
transfer the eligible taxpayer has
received a certification from the
Environmental Protection Agency or an
appropriate State agency (within the
meaning of section 198(c)(4)) in the
State in which such property is located
that, as a result of the eligible
taxpayer's remediation actions, such
property would not be treated as a
qualifying brownfield property in the
hands of the transferee.
For purposes of subclause (II), before issuing
such certification, the Environmental Protection
Agency or appropriate State agency shall respond
to comments received pursuant to clause (ii)(V) in
the same form and manner as required under section
117(b) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980
(as in effect on the date of the enactment of this
paragraph).
(ii) Request
for <<NOTE: Deadline.>> certification.--Any
request by an eligible taxpayer for a
certification described in clause (i) shall be
made not later than the date of the transfer and
shall include a sworn statement by the eligible
taxpayer certifying the following:
(I) Remedial actions which comply
with all applicable or relevant and
appropriate requirements (consistent
with section 121(d) of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980) have been
substantially completed, such that there
are no hazardous substances, pollutants,
or contaminants which complicate the expansion,
redevelopment, or reuse of the
property given the property's reasonably
anticipated future land uses or capacity
for uses of the property.
(II) The reasonably anticipated
future land uses or capacity for uses of
the property are more economically
productive or environmentally beneficial
than the uses of the property in
existence on the date of the
certification described in subparagraph
(C)(i). For purposes of the preceding
sentence, use of property as a landfill
or other hazardous waste facility shall
not be considered more economically
productive or environmentally
beneficial.
(III) A remediation plan has been
implemented to bring the property into
compliance with all applicable local,
State, and Federal environmental laws,
regulations, and standards and to ensure
that the remediation protects human
health and the environment.
(IV) The remediation plan
described in subclause (III), including
any physical improvements required to
remediate the property, is either
complete or substantially complete, and,
if substantially complete, sufficient
monitoring, funding, institutional
controls, and financial assurances have
been put in place to ensure the complete
remediation of the property in
accordance with the remediation plan as
soon as is reasonably practicable after
the sale, exchange, or other disposition
of such property.
(V) Public notice <<NOTE: Notice.>> and the
opportunity for comment on the request
for certification was completed before
the date of such request. Such notice
and opportunity for comment shall be in
the same form and manner as required for
public participation required under
section 117(a) of the Comprehensive
Environmental Response, Compensation,
and Liability Act of 1980 (as in effect
on the date of the enactment of this
paragraph). For purposes of this
subclause, public notice shall include,
at a minimum, publication in a major
local newspaper of general circulation.
(iii) Attachment to tax returns.--A copy of
each of the requests for certification described
in clause (ii) of subparagraph (C) and this
subparagraph shall be included in the tax return
of the eligible taxpayer (and, where applicable,
of the qualifying partnership) for the taxable
year during which the transfer occurs.
(iv) Substantial completion.--For purposes
of this subparagraph, a remedial action is
substantially complete when any necessary physical
construction is complete, all immediate threats
have been eliminated, and all long-term threats
are under control.
(E) Eligible remediation expenditures.--For
purposes of this paragraph--
(i) In general.--The term `eligible
remediation expenditures' means, with respect to
any qualifying brownfield property, any amount
paid or incurred by the eligible taxpayer to an
unrelated third person to obtain a Phase I
environmental site assessment of the property, and
any amount so paid or incurred after the date of
the certification described in subparagraph (C)(i)
for goods and services necessary to obtain a
certification described in subparagraph (D)(i)
with respect to such property, including
expenditures--
(I) to manage, remove, control,
contain, abate, or otherwise remediate a
hazardous substance, pollutant, or
contaminant on the property,
(II) to obtain a Phase II
environmental site assessment of the
property, including any expenditure to
monitor, sample, study, assess, or
otherwise evaluate the release, threat
of release, or presence of a hazardous
substance, pollutant, or contaminant on
the property,
(III) to obtain environmental
regulatory certifications and approvals
required to manage the remediation and
monitoring of the hazardous substance,
pollutant, or contaminant on the
property, and
(IV) regardless of whether it is
necessary to obtain a certification
described in subparagraph (D)(i)(II), to
obtain remediation cost-cap or stop-loss
coverage, re-opener or regulatory action
coverage, or similar coverage under
environmental insurance policies, or
financial guarantees required to manage
such remediation and monitoring.
(ii) Exceptions.--Such term shall not
include--
(I) any portion of the purchase
price paid or incurred by the eligible
taxpayer to acquire the qualifying
brownfield property,
(II) environmental insurance costs
paid or incurred to obtain legal defense
coverage, owner/operator liability
coverage, lender liability coverage,
professional liability coverage, or
similar types of coverage,
(III) any amount paid or incurred
to the extent such amount is reimbursed,
funded, or otherwise subsidized by
grants provided by the United States, a
State, or a political subdivision of a
State for use in connection with the
property, proceeds of an issue of State
or local government obligations used to
provide financing for the property the
interest of which is exempt from tax
under section 103, or subsidized
financing provided (directly or
indirectly) under a Federal, State, or
local program provided in connection
with the property, or
(IV) any expenditure paid or
incurred before the date of the
enactment of this paragraph.
For purposes of subclause (III), the Secretary may
issue guidance regarding the treatment of
government-provided funds for purposes of
determining eligible remediation expenditures.
(F) Determination of gain or loss.--For purposes
of this paragraph, the determination of gain or loss
shall not include an amount treated as gain which is
ordinary income with respect to section 1245 or section
1250 property, including amounts deducted as section 198
expenses which are subject to the recapture rules of
section 198(e), if the taxpayer had deducted such
amounts in the computation of its unrelated business
taxable income.
G) Special rules for partnerships.--
(i) In general.--In the case of an eligible
taxpayer which is a partner of a qualifying
partnership which acquires, remediates, and sells,
exchanges, or otherwise disposes of a qualifying
brownfield property, this paragraph shall apply to
the eligible taxpayer's distributive share of the
qualifying partnership's gain or loss from the
sale, exchange, or other disposition of such
property.
(ii) Qualifying partnership.--The term
qualifying partnership' means a partnership
which--
(I) has a partnership agreement
which satisfies the requirements of
section 514(c)(9)(B)(vi) at all times
beginning on the date of the first
certification received by the
partnership under subparagraph (C)(i),
(II) satisfies the requirements of
subparagraphs (B)(i), (C), (D), and (E),
if `qualified partnership' is
substituted for `eligible taxpayer' each
place it appears therein (except
subparagraph (D)(iii)), and
(III) is not an organization which
would be prevented from constituting an
eligible taxpayer by reason of
subparagraph (B)(ii).
(iii) Requirement
that <<NOTE: Applicability.>> tax-exempt partner
be a partner since first certification.--This
paragraph shall apply with respect to any eligible
taxpayer which is a partner of a partnership which
acquires, remediates, and sells, exchanges, or
otherwise disposes of a qualifying brownfield
property only if such eligible taxpayer was a
partner of the qualifying partnership at all times
beginning on the date of the first certification
received by the partnership under subparagraph
(C)(i) and ending on the date of the sale,
exchange, or other disposition of the property by
the partnership.
(iv) Regulations.--The Secretary shall
prescribe such regulations as are necessary to
prevent abuse of the requirements of this
subparagraph, including abuse through--
(I) the use of special allocations
of gains or losses, or
(II) changes in ownership of
partnership interests held by eligible
taxpayers.
(H) Special rules for multiple properties.--
(i) In general.--An eligible taxpayer or a
qualifying partnership of which the eligible
taxpayer is a partner may make a 1-time election
to apply this paragraph to more than 1 qualifying
brownfield property by averaging the eligible
remediation expenditures for all such properties
acquired during the election period. If the
eligible taxpayer or qualifying partnership makes
such an election, the election shall apply to all
qualified sales, exchanges, or other dispositions
of qualifying brownfield properties the
acquisition and transfer of which occur during the
period for which the election remains in effect.
(ii) Election.--An election under clause (i)
shall be made with the eligible taxpayer's or
qualifying partnership's timely filed tax return
(including extensions) for the first taxable year
for which the taxpayer or qualifying partnership
intends to have the election apply. An election
under clause (i) is effective for the period--
(I) beginning on the date which is
the first day of the taxable year of the
return in which the election is included
or a later day in such taxable year
selected by the eligible taxpayer or
qualifying partnership, and
(II) ending on the date which is
the earliest of a date of revocation
selected by the eligible taxpayer or
qualifying partnership, the date which
is 8 years after the date described in
subclause (I), or, in the case of an
election by a qualifying partnership of
which the eligible taxpayer is a
partner, the date of the termination of
the qualifying partnership.
(iii) Revocation.--An eligible taxpayer or
qualifying partnership may revoke an election
under clause (i)(II) by filing a statement of
revocation with a timely filed tax return
(including extensions). A revocation is effective
as of the first day of the taxable year of the
return in which the revocation is included or a
later day in such taxable year selected by the
eligible taxpayer or qualifying partnership. Once
an eligible taxpayer or qualifying partnership
revokes the election, the eligible taxpayer or
qualifying partnership is ineligible to make
another election under clause (i) with respect to
any qualifying brownfield property subject to the
revoked election.
(I) Recapture.--If an eligible taxpayer excludes
gain or loss from a sale, exchange, or other disposition
of property to which an election under subparagraph (H)
applies, and such property fails to satisfy the
requirements of this paragraph, the unrelated business
taxable income of the eligible taxpayer for the taxable
year in which such failure occurs shall be determined by
including any previously excluded gain or loss from such
sale, exchange, or other disposition allocable to such
taxpayer, and interest shall be determined at the
overpayment rate established under section 6621 on any
resulting tax for the period beginning with the due date
of the return for the taxable year during
which such sale, exchange, or other disposition
occurred, and ending on the date of payment of the tax.
(J) Related persons.--For purposes of this
paragraph, a person shall be treated as related to
another person if--
(i) such person bears a relationship to such
other person described in section 267(b)
(determined without regard to paragraph (9)
thereof), or section 707(b)(1), determined by
substituting `25 percent' for `50 percent' each
place it appears therein, and
(ii) in the case such other person is a
nonprofit organization, if such person controls
directly or indirectly more than 25 percent of the
governing body of such organization.
(K) Termination.--Except for purposes of
determining the average eligible remediation
expenditures for properties acquired during the election
period under subparagraph (H), this paragraph shall not
apply to any property acquired by the eligible taxpayer
or qualifying partnership after December 31, 2009.
(c) Special rules for partnerships
(1) In general
If a trade or business regularly carried on by a partnership of
which an organization is a member is an unrelated trade or
business with respect to such organization, such organization in
computing its unrelated business taxable income shall, subject to
the exceptions, additions, and limitations contained in
subsection (b), include its share (whether or not distributed) of
the gross income of the partnership from such unrelated trade or
business and its share of the partnership deductions directly
connected with such gross income.
(2) Special rule where partnership year is different from
organization's year
If the taxable year of the organization is different from that
of the partnership, the amounts to be included or deducted in
computing the unrelated business taxable income under paragraph
(1) shall be based upon the income and deductions of the
partnership for any taxable year of the partnership ending within
or with the taxable year of the organization.
(d) Treatment of dues of agricultural or horticultural
organizations
(1) In general
If -
(A) an agricultural or horticultural organization described
in section 501(c)(5) requires annual dues to be paid in order
to be a member of such organization, and
(B) the amount of such required annual dues does not exceed
$100,
in no event shall any portion of such dues be treated as derived
by such organization from an unrelated trade or business by
reason of any benefits or privileges to which members of such
organization are entitled.
(2) Indexation of $100 amount
In the case of any taxable year beginning in a calendar year
after 1995, the $100 amount in paragraph (1) shall be increased
by an amount equal to -
(A) $100, multiplied by
(B) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
by substituting ''calendar year 1994'' for ''calendar year
1992'' in subparagraph (B) thereof.
(3) Dues
For purposes of this subsection, the term ''dues'' means any
payment (whether or not designated as dues) which is required to
be made in order to be recognized by the organization as a member
of the organization.
(e) Special rules applicable to S corporations
(1) In general
If an organization described in section 1361(c)(2)(A)(vi) or
1361(c)(6) holds stock in an S corporation -
(A) such interest shall be treated as an interest in an
unrelated trade or business, and
(B) notwithstanding any other provision of this part -
(i) all items of income, loss, or deduction taken into
account under section 1366(a), and
(ii) any gain or loss on the disposition of the stock in
the S corporation,
shall be taken into account in computing the unrelated business
taxable income of such organization.
(2) Basis reduction
Except as provided in regulations, for purposes of paragraph
(1), the basis of any stock acquired by purchase (as defined in
section 1361(e)(1)(C)) shall be reduced by the amount of any
dividends received by the organization with respect to the stock.
(3) Exception for ESOPs
This subsection shall not apply to employer securities (within
the meaning of section 409(l)) held by an employee stock
ownership plan described in section 4975(e)(7).
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 170; Pub. L. 85-367, Sec. 1(a),
Apr. 7, 1958, 72 Stat. 80; Pub. L. 88-380, Sec. 1, July 17, 1964,
78 Stat. 333; Pub. L. 89-809, title I, Sec. 104(g), Nov. 13, 1966,
80 Stat. 1559; Pub. L. 91-172, title I, Sec. 121(b)(1), (2), Dec.
30, 1969, 83 Stat. 537, 538; Pub. L. 92-418, Sec. 1(b), Aug. 29,
1972, 86 Stat. 656; Pub. L. 94-396, Sec. 1(a), Sept. 3, 1976, 90
Stat. 1201; Pub. L. 94-455, title XIX, Sec. 1901(b)(8)(F),
1906(b)(13)(A), 1951(b)(8)(A), Oct. 4, 1976, 90 Stat. 1794, 1834,
1839; Pub. L. 94-568, Sec. 1(b), Oct. 20, 1976, 90 Stat. 2697; Pub.
L. 95-345, Sec. 2(a)(2), (b), Aug. 15, 1978, 92 Stat. 481; Pub. L.
97-448, title I, Sec. 102(m)(3), Jan. 12, 1983, 96 Stat. 2374; Pub.
L. 98-369, div. A, title V, Sec. 511(b), July 18, 1984, 98 Stat.
860; Pub. L. 99-514, title XVIII, Sec. 1851(a)(10), Oct. 22, 1986,
100 Stat. 2861; Pub. L. 100-203, title X, Sec. 10213(a), Dec. 22,
1987, 101 Stat. 1330-406; Pub. L. 100-647, title I, Sec.
1018(t)(2)(B), Nov. 10, 1988, 102 Stat. 3587; Pub. L. 101-508,
title XI, Sec. 11801(a)(23), Nov. 5, 1990, 104 Stat. 1388-521; Pub.
L. 103-66, title XIII, Sec. 13145(a), 13147(a), 13148(a), (b), Aug.
10, 1993, 107 Stat. 443, 444; Pub. L. 104-188, title I, Sec.
1115(a), 1316(c), 1603(a), Aug. 20, 1996, 110 Stat. 1761, 1786,
1835; Pub. L. 105-34, title III, Sec. 312(d)(5), title X, Sec.
1041(a), title XV, Sec. 1523(a), title XVI, Sec. 1601(c)(4)(A),
(D), Aug. 5, 1997, 111 Stat. 840, 938, 1070, 1087; Pub. L. 105-206,
title VI, Sec. 6010(j)(1), (2), 6023(8), July 22, 1998, 112 Stat.
815, 825.)
Amendment of Section
ADJUSTMENT OF AMOUNT OF ANNUAL DUES THRESHOLD FOR TAX YEARS
BEGINNING IN 2002
For adjustment of maximum amount of annual dues paid to
agricultural or horticultural organizations under subsec. (d)(1)
of this section for tax years beginning in 2002, see section 3.14
of Revenue Procedure 2001-59, set out as a note under section 1
of this title.
References in Text
REFERENCES IN TEXT
The date of the enactment of the Taxpayer Relief Act of 1997,
referred to in subsec. (a)(3)(D), is the date of enactment of Pub.
L. 105-34, which was approved Aug. 5, 1997.
The date of the enactment of the Tax Reform Act of 1984, referred
to in subsec. (a)(3)(E)(ii)(II), (III), is the date of enactment of
division A of Pub. L. 98-369, which was approved July 18, 1984.
Miscellaneous
AMENDMENTS
2006 - Pension Protection Act of 2006 (P.L. 109-280)
SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO
CONTROLLING EXEMPT ORGANIZATIONS.
(a) In General.--Paragraph (13) of section 512(b) (relating to
special rules for certain amounts received from controlled entities) is
amended by redesignating subparagraph (E) as subparagraph (F) and by
inserting after subparagraph (D) the following new subparagraph:
``(E) Paragraph to apply only to certain excess
payments.--
``(i) <<NOTE: Applicability.>> In general.--
Subparagraph (A) shall apply only to the portion
of a qualifying specified payment received or
accrued by the controlling organization that
exceeds the amount which would have been paid or
accrued if such payment met the requirements
prescribed under section 482.
``(ii) Addition to tax for valuation
misstatements.--The tax imposed by this chapter on
the controlling organization shall be increased by
an amount equal to 20 percent of the larger of--
``(I) such excess determined without
regard to any amendment or supplement to
a return of tax, or
``(II) such excess determined with
regard to all such amendments and
supplements.
``(iii) Qualifying specified payment.--The
term `qualifying specified payment' means a
specified payment which is made pursuant to--
``(I) a binding written contract in
effect on the date of the enactment of
this subparagraph, or
``(II) a contract which is a
renewal, under substantially similar
terms, of a contract described in
subclause (I).
``(iv) Termination.--This subparagraph shall
not apply to payments received or accrued after
December 31, 2007.''.
2004 - Subsec.702(a),Pub.L.108-357, amended Sec.512(b) by
adding paragraph (18). NOTE this may be correctly (19) as
Sec.319(c)(below)added paragraph (18).
Savings Clause.--Nothing in the amendments made by this section
shall affect any duty, liability, or other requirement imposed
under any other Federal or State law. Notwithstanding section
128(b) of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, a certification provided by the
Environmental Protection Agency or an appropriate State agency
(within the meaning of section 198(c)(4) of the Internal Revenue
Code of 1986) shall not affect the liability of any
person under section 107(a) of such Act.
2004 - Pub. L. 108-357, Sec. 319(c). Subsection (b) of section 512
(relating to modifications) is amended by adding at
the end the following new paragraph:
(18) Treatment of mutual or cooperative electric
companies.--In the case of a mutual or cooperative electric
company described in section 501(c)(12), there shall be excluded
income which is treated as member income under subparagraph (H)
thereof.
2004 - Subsec.233(d),Pub.L.108-357, amended Sec.512(e)(1)by
inserting "1361(c)(2)(A)(vi) or'' before ``1361(c)(6)''.
1998 - Subsec. (b)(13)(A). Pub. L. 105-206, Sec. 6010(j)(1),
inserted ''or accrues'' after ''receives'' in first sentence.
Subsec. (b)(13)(B)(i)(I). Pub. L. 105-206, Sec. 6010(j)(2),
struck out ''(as defined in section 513A(a)(5)(A))'' after ''exempt
purposes''.
Subsec. (b)(17)(B)(ii)(II). Pub. L. 105-206, Sec. 6023(8),
substituted ''rule'' for ''Rule'' in subcl. heading.
1997 - Subsec. (a)(3)(D). Pub. L. 105-34, Sec. 312(d)(5),
inserted ''(as in effect on the day before the date of the
enactment of the Taxpayer Relief Act of 1997)'' after ''1034''.
Subsec. (b)(13). Pub. L. 105-34, Sec. 1041(a), amended par. (13)
generally. Prior to amendment, par. (13) related to inclusion in
gross income of controlling organization of amounts of interest,
annuities, royalties, and rents derived from a controlled
organization.
Subsec. (e)(1). Pub. L. 105-34, Sec. 1601(c)(4)(D), substituted
''section 1361(c)(6)'' for ''section 1361(c)(7)''.
Subsec. (e)(2). Pub. L. 105-34, Sec. 1601(c)(4)(A), substituted
''as defined in section 1361(e)(1)(C)'' for ''within the meaning of
section 1012''.
Subsec. (e)(3). Pub. L. 105-34, Sec. 1523(a), added par. (3).
1996 - Subsec. (b)(17). Pub. L. 104-188, Sec. 1603(a), added par.
(17).
Subsec. (d). Pub. L. 104-188, Sec. 1115(a), added subsec. (d).
Subsec. (e). Pub. L. 104-188, Sec. 1316(c), added subsec. (e).
1993 - Subsec. (b)(1). Pub. L. 103-66, Sec. 13148(a), inserted
''amounts received or accrued as consideration for entering into
agreements to make loans,'' before ''and annuities''.
Subsec. (b)(5). Pub. L. 103-66, Sec. 13148(b), in second
sentence, substituted ''all gains or losses recognized, in
connection with the organization's investment activities, from''
for ''all gains on'', struck out '', written by the organization in
connection with its investment activities,'' after ''termination of
options'', and inserted before period at end ''or real property and
all gains or losses from the forfeiture of good-faith deposits
(that are consistent with established business practice) for the
purchase, sale, or lease of real property in connection with the
organization's investment activities''.
Subsec. (b)(16). Pub. L. 103-66, Sec. 13147(a), added par. (16).
Subsec. (c)(2), (3). Pub. L. 103-66, Sec. 13145(a), redesignated
par. (3) as (2), substituted ''paragraph (1)'' for ''paragraph (1)
or (2)'', and struck out heading and text of former par. (2). Text
read as follows: ''Notwithstanding any other provision of this
section -
''(A) any organization's share (whether or not distributed) of
the gross income of a publicly traded partnership (as defined in
section 469(k)(2)) shall be treated as gross income derived from
an unrelated trade or business, and
''(B) such organization's share of the partnership deductions
shall be allowed in computing unrelated business taxable
income.''
1990 - Subsec. (b)(14). Pub. L. 101-508 struck out par. (14)
which read as follows: ''Except as provided in paragraph (4), in
the case of a church, or convention or association of churches, for
taxable years beginning before January 1, 1976, there shall be
excluded all gross income derived from a trade or business and all
deductions directly connected with the carrying on of such trade or
business if such trade or business was carried on by such
organization or its predecessor before May 27, 1969.''
1988 - Subsec. (a)(3)(E)(ii)(II). Pub. L. 100-647 substituted
''subclause (I)'' for ''subclause (II)'' and a period for comma at
end.
1987 - Subsec. (c). Pub. L. 100-203 substituted ''for
partnerships'' for ''applicable to partnerships'' in heading and
amended text generally. Prior to amendment, text read as follows:
''If a trade or business regularly carried on by a partnership of
which an organization is a member is an unrelated trade or business
with respect to such organization, such organization in computing
its unrelated business taxable income shall, subject to the
exceptions, additions, and limitations contained in subsection (b),
include its share (whether or not distributed) of the gross income
of the partnership from such unrelated trade or business and its
share of the partnership deductions directly connected with such
gross income. If the taxable year of the organization is different
from that of the partnership, the amounts to be so included or
deducted in computing the unrelated business taxable income shall
be based upon the income and deductions of the partnership for any
taxable year of the partnership ending within or with the taxable
year of the organization.''
1986 - Subsec. (a)(3)(E)(i). Pub. L. 99-514, Sec. 1851(a)(10)(A),
substituted ''determined under section 419A (without regard to
subsection (f)(6) thereof)'' for ''determined under section
419A(c)''.
Subsec. (a)(3)(E)(ii). Pub. L. 99-514, Sec. 1851(a)(10)(B), (C),
redesignated cl. (iii) as (ii), in subcl. I substituted ''an
existing reserve'' for ''a existing reserve'', and substituted new
subcl. (II) for former subcl. (II) which read as follows: ''For
purposes of subclause (I), the term 'existing reserve or
post-retirement medical or life insurance benefit' means the amount
of assets set aside as of the close of the last plan year ending
before the date of the enactment of the Tax Reform Act of 1984 for
purposes of post-retirement medical benefits or life insurance
benefits to be provided to covered employees.'' Former cl. (ii),
which provided that no set aside for assets used in the provision
of benefits described in cl. (ii) of subpar. (B), could be taken
into account, was struck out.
Subsec. (a)(3)(E)(iii), (iv). Pub. L. 99-514, Sec.
1851(a)(10)(B), (D), redesignated former cl. (iv) as (iii) and
substituted ''subparagraph shall not'' for ''paragraph shall
not''. Former cl. (iii) redesignated (ii).
1984 - Subsec. (a)(3). Pub. L. 98-369, Sec. 511(b)(1)(A),
substituted ''paragraph (7), (9), (17), or (20) of section 501(c)''
for ''section 501(c)(7) or (9)'' wherever appearing in heading and
in text.
Subsec. (a)(3)(B)(ii). Pub. L. 98-369, Sec. 511(b)(1)(B),
substituted ''paragraph (9), (17), or (20) of section 501(c)'' for
''section 501(c)(9)''.
Subsec. (a)(3)(C), (D). Pub. L. 98-369, Sec. 511(b)(1)(A),
substituted in subpars. (C) and (D) ''paragraph (7), (9), (17), or
(20) of section 501(c)'' for ''section 501(c)(7) or (9)'' wherever
appearing.
Subsec. (a)(3)(E). Pub. L. 98-369, Sec. 511(b)(2), added subpar.
(E).
1983 - Subsec. (b)(10). Pub. L. 97-448 substituted ''10 percent''
for ''5 percent''.
1978 - Subsec. (a)(5). Pub. L. 95-345, Sec. 2(b), added par. (5).
Subsec. (b)(1). Pub. L. 95-345, Sec. 2(a)(2), inserted provision
relating to payments with respect to securities loans.
1976 - Subsec. (a)(3)(A). Pub. L. 94-568 provided that for
purposes of the general rule, the deductions provided by sections
243, 244, and 245 (relating to dividends received by corporations)
shall be treated as not directly connected with the production of
gross income.
Subsec. (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ''or
his delegate'' after ''Secretary''.
Subsec. (b)(5). Pub. L. 94-396 inserted provision relating to
exclusion of gains on the lapse or termination of options to buy or
sell securities.
Subsec. (b)(13), (14). Pub. L. 94-455, Sec. 1951(b)(8)(A),
redesignated pars. (15) and (16) as (13) and (14), respectively.
Former pars. (13) and (14), relating to exceptions, additions, and
limitations applicable in determining unrelated business taxable
income, were struck out.
Subsec. (b)(15). Pub. L. 94-455, Sec. 1901(b)(8)(F),
1906(b)(13)(A), 1951(b)(8)(A), redesignated par. (17) as (15) and
substituted in subpar. (B) ''educational organization described in
section 170(b)(1)(A)(ii)'' for ''educational institution (as
defined in section 151(e)(4))'' after ''order or by an'', and
struck out ''or his delegate'' after ''Secretary''. Former par.
(15) redesignated (13).
Subsec. (b)(16), (17). Pub. L. 94-455, Sec. 1951(b)(8)(A),
redesignated pars. (16) and (17) as (14) and (15), respectively.
1972 - Subsec. (a)(4). Pub. L. 92-418 added par. (4).
1969 - Subsec. (a). Pub. L. 91-172, Sec. 121(b)(1), designated
existing provisions as pars. (1) and (2)(B) and added pars. (2)(A)
and (3).
Subsec. (b). Pub. L. 91-172, Sec. 121(b)(2)(D), substituted
''Modifications'' for ''Exceptions, additions, and limitations'',
in heading, and, in text preceding par. (1) substituted ''The
modifications referred to in subsection (a)'' for ''The exceptions,
additions, and limitations applicable in determining unrelated
business taxable income''.
Subsec. (b)(3)(A). Pub. L. 91-172, Sec. 121(b)(2)(A), inserted
reference to exceptions set out in subsec. (b)(3)(B) in text
preceding cl. (i), substituted ''property described in section
1245(a)(3)(C)'' for ''personal property leased with the real
property'' in parenthetical of cl. (i), and added cl. (ii).
Subsec. (b)(3)(B). Pub. L. 91-172, Sec. 121(b)(2)(A), added
subpar. (B).
Subsec. (b)(3)(C). Pub. L. 91-172, Sec. 121(b)(2)(A), substituted
''rents excluded under subparagraph (A)'' for ''such rents''.
Subsec. (b)(4). Pub. L. 91-172, Sec. 121(b)(2)(A), inserted
reference to pars. (1), (3) and (5) of this subsec., and
substituted ''debt financed property'' for ''a business lease''.
Subsec. (b)(12). Pub. L. 91-172, Sec. 121(b)(2)(B), made the
allowance of the specific $1,000 deduction inapplicable for the
purposes of computing the net operating loss under section 172 of
this title and par. (6) of this subsec., and provided for the
allowance of specific deductions equal to the lower of $1,000 or
the gross income derived from any unrelated trade or business
carried on by a parish, individual church, district, or other local
unit.
Subsec. (b)(15) to (17). Pub. L. 91-172, Sec. 121(b)(2)(C), added
pars. (15) to (17).
1966 - Subsec. (a). Pub. L. 89-809 substituted '', the unrelated
business taxable income shall be its unrelated business taxable
income which is effectively connected with the conduct of a trade
or business within the United States'' for '', the unrelated
business taxable income shall be its unrelated business taxable
income derived from sources within the United States determined
under subchapter N (sec. 861 and following), relating to tax based
on income from sources within or without the United States''.
1964 - Subsec. (b)(14). Pub. L. 88-380 added par. (14).
1958 - Subsec. (b)(13). Pub. L. 85-367 added par. (13).
EFFECTIVE DATE OF 2004 AMENDMENT
2006 - Pension Protection Act of 2006 (P.L. 109-280)
SEC. 1205(c) Effective Date.--
(1) <<NOTE: 26 USC 512 note.>> Subsection (a).--The
amendments made by subsection (a) shall apply to payments
received or accrued after December 31, 2005.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendments made by this section (Sec.702, PL108-357) shall
apply to any gain or loss on the sale, exchange, or other
disposition of any property acquired by the taxpayer
after December 31, 2004.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by section 233(d),Pub.L.108-357, amending
Sec.512(e)(1)shall take effect on the date of the enactment
of this Act.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6023(8) of Pub. L. 105-206 effective July
22, 1998, see section 6023(32) of Pub. L. 105-206, set out as a
note under section 34 of this title.
Amendment by section 6010(j)(1), (2) of Pub. L. 105-206
effective, except as otherwise provided, as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 6024 of Pub. L. 105-206,
set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(5) of Pub. L. 105-34 applicable to
sales and exchanges after May 6, 1997, with certain exceptions, see
section 312(d)((e)) of Pub. L. 105-34, set out as a note under
section 121 of this title.
Section 1041(b) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6010(j)(3), July 22, 1998, 112 Stat. 815, provided
that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (amending this section) shall apply
to taxable years beginning after the date of the enactment of this
Act (Aug. 5, 1997).
''(2) Binding contracts. - The amendments made by this section
shall not apply to any amount received or accrued during the first
2 taxable years beginning on or after the date of the enactment of
this Act if such amount is received or accrued pursuant to a
written binding contract in effect on June 8, 1997, and at all
times thereafter before such amount is received or accrued. The
preceding sentence shall not apply to any amount which would (but
for the exercise of an option to accelerate payment of such amount)
be received or accrued after such 2 taxable years.''
Section 1523(b) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1997.''
Amendment by section 1601(c)(4)(A), (D) of Pub. L. 105-34
effective as if included in the provisions of the Small Business
Job Protection Act of 1996, Pub. L. 104-188, to which it relates,
see section 1601(j) of Pub. L. 105-34, set out as a note under
section 23 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1115(b) of Pub. L. 104-188 provided that:
''(1) In general. - The amendment made by this section (amending
this section) shall apply to taxable years beginning after December
31, 1986.
''(2) Transitional rule. - If -
''(A) for purposes of applying part III of subchapter F of
chapter 1 of the Internal Revenue Code of 1986 to any taxable
year beginning before January 1, 1987, an agricultural or
horticultural organization did not treat any portion of
membership dues received by it as income derived in an unrelated
trade or business, and
''(B) such organization had a reasonable basis for not treating
such dues as income derived in an unrelated trade or business,
then, for purposes of applying such part III to any such taxable
year, in no event shall any portion of such dues be treated as
derived in an unrelated trade or business.
''(3) Reasonable basis. - For purposes of paragraph (2), an
organization shall be treated as having a reasonable basis for not
treating membership dues as income derived in an unrelated trade or
business if the taxpayer's treatment of such dues was in reasonable
reliance on any of the following:
''(A) Judicial precedent, published rulings, technical advice
with respect to the organization, or a letter ruling to the
organization.
''(B) A past Internal Revenue Service audit of the organization
in which there was no assessment attributable to the
reclassification of membership dues for purposes of the tax on
unrelated business income.
''(C) Long-standing recognized practice of agricultural or
horticultural organizations.''
Amendment by section 1316(c) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1997, see section 1316(f) of
Pub. L. 104-188, set out as a note under section 170 of this title.
Section 1603(b) of Pub. L. 104-188 provided that: ''The amendment
made by this section (amending this section) shall apply to amounts
included in gross income in any taxable year beginning after
December 31, 1995.''
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13145(b) of Pub. L. 103-66 provided that: ''The
amendments made by subsection (a) (amending this section) shall
apply to partnership years beginning on or after January 1, 1994.''
Section 13147(b) of Pub. L. 103-66 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
property acquired on or after January 1, 1994.''
Section 13148(c) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section) shall apply
to amounts received on or after January 1, 1994.''
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 1987 AMENDMENT
Section 10213(b) of Pub. L. 100-203 provided that: ''The
amendment made by subsection (a) (amending this section) shall
apply to partnership interests acquired after December 17, 1987.''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years ending
after Dec. 31, 1985, with such amendments treated as a change in
the rate of tax imposed by chapter 1 of this title for purposes of
section 15 of this title, see section 511(e)(6) of Pub. L. 98-369,
set out as an Effective Date note under section 419 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 1978 AMENDMENT
Amendment by Pub. L. 95-345 applicable with respect to amounts
received after Dec. 31, 1976, as payments with respect to
securities loans (as defined in subsec. (a)(5) of this section),
and transfers of securities, under agreements described in section
1058 of this title, occurring after such date, see section 2(e) of
Pub. L. 95-345, set out as a note under section 509 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Amendment by Pub. L. 94-568 applicable to taxable years beginning
after Oct. 20, 1976, see section 1(d) of Pub. L. 94-568, set out as
a note under section 501 of this title.
Amendment by section 1901(b)(8)(F) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Amendment by section 1951(b)(8)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1951(d) of Pub. L. 94-455, set out as a note under section
72 of this title.
Section 1(b) of Pub. L. 94-396 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to gain
from options which lapse or terminate on or after January 1, 1976,
in taxable years ending on or after such date.''
EFFECTIVE DATE OF 1972 AMENDMENT
Amendment by Pub. L. 92-418 applicable to taxable years beginning
after Dec. 31, 1969, see section 1(c) of Pub. L. 92-418, set out as
a note under section 501 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out
as a note under section 511 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to taxable
years beginning after Dec. 31, 1966, see section 104(n) of Pub. L.
89-809, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 2 of Pub. L. 88-380 provided that: ''The amendment made
by the first section of this Act (amending this section) shall
apply with respect to taxable years beginning after December 31,
1963.''
EFFECTIVE DATE OF 1958 AMENDMENT
Section 1(b) of Pub. L. 85-367 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years of trusts beginning after December 31, 1955.''
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Section 1951(b)(8)(B) of Pub. L. 94-455 provided that:
''Notwithstanding subparagraph (A) (amending this section), income
received in a taxable year beginning after December 31, 1975, shall
be excluded from gross income in determining unrelated business
taxable income, if such income would have been excluded by
paragraph (13) or (14) of section 512(b) if received in a taxable
year beginning before such date. Any deductions directly connected
with income excluded under the preceding sentence in determining
unrelated business taxable income shall also be excluded for such
purpose.''
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 263, 419A, 502, 509, 511,
513, 514, 664, 681, 772, 851, 856, 878, 995, 1443, 4940, 4943,
4976, 6031 of this title.
