2016 US Code
Title 26 - Internal Revenue Code
Subtitle A - Income Taxes
Chapter 1 - Normal Taxes and Surtaxes
Subchapter B - Computation of Taxable Income
Part IX - Items Not Deductible
Sec. 280H - Limitation on certain amounts paid to employee-owners by personal service corporations electing alternative taxable years
26 U.S.C. § 280H (2016) |
§280H. Limitation on certain amounts paid to employee-owners by personal service corporations electing alternative taxable years |
(a) General rule
If— (1) an election by a personal service corporation under section 444 is in effect for a taxable year, and (2) such corporation does not meet the minimum distribution requirements of subsection (c) for such taxable year, then the deduction otherwise allowed under this chapter for applicable amounts paid or incurred by such corporation to employee-owners shall not exceed the maximum deductible amount. The preceding sentence shall not apply for purposes of subchapter G (relating to personal holding companies). (b) Carryover of nondeductible amountsIf any amount is not allowed as a deduction for a taxable year under subsection (a), such amount shall be treated as paid or incurred in the succeeding taxable year. (c) Minimum distribution requirementFor purposes of this section— (1) In generalA personal service corporation meets the minimum distribution requirements of this subsection if the applicable amounts paid or incurred during the deferral period of the taxable year (determined without regard to subsection (b)) equal or exceed the lesser of— (A) the product of— (i) the applicable amounts paid during the preceding taxable year, divided by the number of months in such taxable year, multiplied by (ii) the number of months in the deferral period of the preceding taxable year, or (B) the applicable percentage of the adjusted taxable income for the deferral period of the taxable year. The term "applicable percentage" means the percentage (not in excess of 95 percent) determined by dividing— (A) the applicable amounts paid or incurred during the 3 taxable years immediately preceding the taxable year, by (B) the adjusted taxable income of such corporation for such 3 taxable years. For purposes of this section, the term "maximum deductible amount" means the sum of— (1) the applicable amounts paid during the deferral period, plus (2) an amount equal to the product of— (A) the amount determined under paragraph (1), divided by the number of months in the deferral period, multiplied by (B) the number of months in the nondeferral period. No net operating loss carryback shall be allowed to (or from) any taxable year of a personal service corporation to which an election under section 444 applies. (f) Other definitions and special rulesFor purposes of this section— (1) Applicable amountThe term "applicable amount" means any amount paid to an employee-owner which is includible in the gross income of such employee, other than— (A) any gain from the sale or exchange of property between the owner-employee and the corporation, or (B) any dividend paid by the corporation. The term "employee-owner" has the meaning given such term by section 269A(b)(2) (as modified by section 441(i)(2)). The term "deferral period" has the meaning given to such term by section 444(b)(4). The term "nondeferral period" means the portion of the taxable year of the personal service corporation which occurs after the portion of such year constituting the deferral period. The term "adjusted taxable income" means taxable income determined without regard to— (A) any amount paid to an employee-owner which is includible in the gross income of such employee-owner, and (B) any net operating loss carryover to the extent such carryover is attributable to amounts described in subparagraph (A). The term "personal service corporation" has the meaning given to such term by section 441(i)(2). |
(Added Pub. L. 100–203, title X, §10206(c)(1), Dec. 22, 1987, 101 Stat. 1330–401; amended Pub. L. 100–647, title II, §2004(e)(2)(B), (3), (14)(A), (C), Nov. 10, 1988, 102 Stat. 3600, 3602.) |
AMENDMENTS
1988—Subsecs. (c)(1)(A)(i), (d)(1). Pub. L. 100–647, §2004(e)(14)(C), substituted "amounts paid" for "amounts paid or incurred". Subsec. (f)(2). Pub. L. 100–647, §2004(e)(3), substituted "section 269A(b)(2) (as modified by section 441(i)(2))" for "section 296A(b)(2)". Subsec. (f)(4). Pub. L. 100–647, §2004(e)(14)(A), amended par. (4) generally. Prior to amendment, par. (4) read as follows: "The term 'adjusted taxable income' means taxable income increased by any amount paid or incurred to an employee-owner which was includible in the gross income of such employee-owner." Subsec. (f)(5). Pub. L. 100–647, §2004(e)(2)(B), added par. (5). EFFECTIVE DATE OF 1988 AMENDMENTAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title. EFFECTIVE DATESection applicable to taxable years beginning after Dec. 31, 1986, see section 10206(d)(1) of Pub. L. 100–203, set out as a note under section 444 of this title. |
United States Code, 2012 Edition, Supplement 4, Title 26 - INTERNAL REVENUE CODE |
Bills and Statutes |
United States Code |
Y 1.2/5: |
Title 26 - INTERNAL REVENUE CODE Subtitle A - Income Taxes CHAPTER 1 - NORMAL TAXES AND SURTAXES Subchapter B - Computation of Taxable Income PART IX - ITEMS NOT DEDUCTIBLE Sec. 280H - Limitation on certain amounts paid to employee-owners by personal service corporations electing alternative taxable years |
section 280H |
2016 |
January 6, 2017 |
No |
standard |
101 Stat. 1330-401 102 Stat. 3600 |
Public Law 100-203, Public Law 100-647 |