§ 72. Annuities; certain proceeds of endowment and life insurance contracts

(iii) Exemption of distributions from trustee to trustee transfer and withholding rules For purposes of sections 401(a)(31), 402(f), and 3405, any qualified long-term care distribution described in clause (i) shall not be treated as an eligible rollover distribution.

(3) Limitations

(A) Certain exceptions not to apply to individual retirement plans Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply to distributions from an individual retirement plan.

(B) Periodic payments under qualified plans must begin after separation Paragraph (2)(A)(iv) shall not apply to any amount paid from a trust described in section 401(a) which is exempt from tax under section 501(a) or from a contract described in section 72(e)(5)(D)(ii) unless the series of payments begins after the employee separates from service.

(4) Change in substantially equal payments

(A) In general If—

the taxpayer’s tax for the 1st taxable year in which such modification occurs shall be increased by an amount, determined under regulations, equal to the tax which (but for paragraph (2)(A)(iv)) would have been imposed, plus interest for the deferral period.

(i) paragraph (1) does not apply to a distribution by reason of paragraph (2)(A)(iv), and

(ii) the series of payments under such paragraph are subsequently modified (other than by reason of death or disability or a distribution to which paragraph (10) applies)—

(I) before the close of the 5-year period beginning with the date of the first payment and after the employee attains age 59½, or

(II) before the employee attains age 59½,

(B) Deferral period For purposes of this paragraph, the term “deferral period” means the period beginning with the taxable year in which (without regard to paragraph (2)(A)(iv)) the distribution would have been includible in gross income and ending with the taxable year in which the modification described in subparagraph (A) occurs.

(C) Rollovers to subsequent plan If—

such transfer or rollover shall not be treated as a modification under subparagraph (A)(ii), and compliance with paragraph (2)(A)(iv) shall be determined on the basis of the combined distributions described in clause (iii).

(i) payments described in paragraph (2)(A)(iv) are being made from a qualified retirement plan,

(ii) a transfer or a rollover from such qualified retirement plan of all or a portion of the taxpayer’s benefit under the plan is made to another qualified retirement plan, and

(iii) distributions from the transferor and transferee plans would in combination continue to satisfy the requirements of paragraph (2)(A)(iv) if they had been made only from the transferor plan,

(5) Employee For purposes of this subsection, the term “employee” includes any participant, and in the case of an individual retirement plan, the individual for whose benefit such plan was established.

(6) Special rules for simple retirement accounts

In the case of any amount received from a simple retirement account (within the meaning of section 408(p)) during the 2-year period beginning on the date such individual first participated in any qualified salary reduction arrangement maintained by the individual’s employer under section 408(p)(2), paragraph (1) shall be applied by substituting “25 percent” for “10 percent”.

(A) In general

(B) Waiver in case of plan conversion to 401(k) or 403(b) In the case of an employee of an employer which terminates the qualified salary reduction arrangement of the employer under section 408(p) and establishes a qualified cash or deferred arrangement described in section 401(k) or purchases annuity contracts described in section 403(b), subparagraph (A) shall not apply to any amount which is paid in a rollover contribution described in section 408(d)(3) into a qualified trust under section 401(k) (but only if such contribution is subsequently subject to the rules of section 401(k)(2)(B)) or an annuity contract described in section 403(b) (but only if such contribution is subsequently subject to the rules of section 403(b)(12)) for the benefit of the employee.

(7) Qualified higher education expenses For purposes of paragraph (2)(E)—

(A) In general The term “qualified higher education expenses” means qualified higher education expenses (as defined in section 529(e)(3)) for education furnished to—

at an eligible educational institution (as defined in section 529(e)(5)).

(i) the taxpayer,

(ii) the taxpayer’s spouse, or

(iii) any child (as defined in section 152(f)(1)) or grandchild of the taxpayer or the taxpayer’s spouse,

(B) Coordination with other benefits The amount of qualified higher education expenses for any taxable year shall be reduced as provided in section 25A(g)(2).

(8) Qualified first-time homebuyer distributions For purposes of paragraph (2)(F)—

(A) In general The term “qualified first-time homebuyer distribution” means any payment or distribution received by an individual to the extent such payment or distribution is used by the individual before the close of the 120th day after the day on which such payment or distribution is received to pay qualified acquisition costs with respect to a principal residence of a first-time homebuyer who is such individual, the spouse of such individual, or any child, grandchild, or ancestor of such individual or the individual’s spouse.

(B) Lifetime dollar limitation The aggregate amount of payments or distributions received by an individual which may be treated as qualified first-time homebuyer distributions for any taxable year shall not exceed the excess (if any) of—

(i) $10,000, over

(ii) the aggregate amounts treated as qualified first-time homebuyer distributions with respect to such individual for all prior taxable years.

(C) Qualified acquisition costs For purposes of this paragraph, the term “qualified acquisition costs” means the costs of acquiring, constructing, or reconstructing a residence. Such term includes any usual or reasonable settlement, financing, or other closing costs.

(D) First-time homebuyer; other definitions For purposes of this paragraph—

(i) First-time homebuyer The term “first-time homebuyer” means any individual if—

(I) such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this paragraph applies, and

(II) subsection (h) or (k) of section 1034 44 See References in Text note below. (as in effect on the day before the date of the enactment of this paragraph) did not suspend the running of any period of time specified in section 1034 4 (as so in effect) with respect to such individual on the day before the date the distribution is applied pursuant to subparagraph (A).

(ii) Principal residence The term “principal residence” has the same meaning as when used in section 121.

(iii) Date of acquisition The term “date of acquisition” means the date—

(I) on which a binding contract to acquire the principal residence to which subparagraph (A) applies is entered into, or

(II) on which construction or reconstruction of such a principal residence is commenced.

(E) Special rule where delay in acquisition If any distribution from any individual retirement plan fails to meet the requirements of subparagraph (A) solely by reason of a delay or cancellation of the purchase or construction of the residence, the amount of the distribution may be contributed to an individual retirement plan as provided in section 408(d)(3)(A)(i) (determined by substituting “120th day” for “60th day” in such section), except that—

(i) section 408(d)(3)(B) shall not be applied to such contribution, and

(ii) such amount shall not be taken into account in determining whether section 408(d)(3)(B) applies to any other amount.

(F) Recontributions

(i) General rule

(I) In general Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B)) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as the case may be.

(II) Treatment of repayments Rules similar to the rules of clauses (ii) and (iii) of paragraph (11)(C) shall apply for purposes of this subsection.

(ii) Qualified distribution For purposes of this subparagraph, the term “qualified distribution” means any distribution—

(I) which is a qualified first-time homebuyer distribution,

(II) which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and

(III) which was received during the period beginning on the date which is 180 days before the first day of the incident period of such qualified disaster and ending on the date which is 30 days after the last day of such incident period.

(iii) Applicable period For purposes of this subparagraph, the term “applicable period” means, in the case of a principal residence in a qualified disaster area with respect to any qualified disaster, the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the applicable date with respect to such disaster.

(9) Special rule for rollovers to section 457 plans For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)).

(10) Distributions to qualified public safety employees and private sector firefighters

(A) In general In the case of a distribution to a qualified public safety employee from a governmental plan (within the meaning of section 414(d)) or a distribution from a plan described in clause (iii), (iv), or (vi) of section 402(c)(8)(B) to an employee who provides firefighting services, paragraph (2)(A)(v) shall be applied by substituting “age 50 or 25 years of service under the plan, whichever is earlier” for “age 55”.

(B) Qualified public safety employee For purposes of this paragraph, the term “qualified public safety employee” means—

(i) any employee of a State or political subdivision of a State who provides police protection, firefighting services, emergency medical services, or services as a corrections officer or as a forensic security employee providing for the care, custody, and control of forensic patients for any area within the jurisdiction of such State or political subdivision, or

(ii) any Federal law enforcement officer described in section 8331(20) or 8401(17) of title 5, United States Code, any Federal customs and border protection officer described in section 8331(31) or 8401(36) of such title, any Federal firefighter described in section 8331(21) or 8401(14) of such title, any air traffic controller described in 8331(30) or 8401(35) of such title, any nuclear materials courier described in section 8331(27) or 8401(33) of such title, any member of the United States Capitol Police, any member of the Supreme Court Police, or any diplomatic security special agent of the Department of State.

(11) Qualified disaster recovery distribution For purposes of paragraph (2)(M)—

(A) In general Except as provided in subparagraph (B), the term “qualified disaster recovery distribution” means any distribution made—

(i) on or after the first day of the incident period of a qualified disaster and before the date that is 180 days after the applicable date with respect to such disaster, and

(ii) to an individual whose principal place of abode at any time during the incident period of such qualified disaster is located in the qualified disaster area with respect to such qualified disaster and who has sustained an economic loss by reason of such qualified disaster.

(B) Aggregate dollar limitation

(i) In general For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified disaster recovery distributions with respect to any qualified disaster in all taxable years shall not exceed $22,000.

(ii) Treatment of plan distributions If a distribution to an individual would (without regard to clause (i)) be a qualified disaster recovery distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified disaster recovery distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $22,000 with respect to the same qualified disaster.

(iii) Controlled group For purposes of clause (ii), the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.

(C) Amount distributed may be repaid

(i) In general Any individual who receives a qualified disaster recovery distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.

(ii) Treatment of repayments of distributions from eligible retirement plans other than IRAs For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified disaster recovery distribution from a plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified disaster recovery distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(iii) Treatment of repayments for distributions from IRAs For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified disaster recovery distribution from an individual retirement plan, then, to the extent of the amount of the contribution, the qualified disaster recovery distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(D) Income inclusion spread over 3-year period

(i) In general In the case of any qualified disaster recovery distribution, unless the taxpayer elects not to have this subparagraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable year period beginning with such taxable year.

(ii) Special rule For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply.

(E) Qualified disaster For purposes of this paragraph and paragraph (8), the term “qualified disaster” means any disaster with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act after December 27, 2020.

(F) Other definitions For purposes of this paragraph and paragraph (8)—

(i) Qualified disaster area

(I) In general The term “qualified disaster area” means, with respect to any qualified disaster, the area with respect to which the major disaster was declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

(II) Exceptions Such term shall not include any area which is a qualified disaster area solely by reason of section 301 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

(ii) Incident period The term “incident period” means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred.

(iii) Applicable date The term “applicable date” means the latest of—

(I) the date of the enactment of this paragraph,

(II) the first day of the incident period with respect to the qualified disaster, or

(III) the date of the disaster declaration with respect to the qualified disaster.

(iv) Eligible retirement plan The term “eligible retirement plan” shall have the meaning given such term by section 402(c)(8)(B).

(G) Special rules

(i) Exemption of distributions from trustee to trustee transfer and withholding rules For purposes of sections 401(a)(31), 402(f), and 3405, qualified disaster recovery distributions shall not be treated as eligible rollover distributions.

(ii) Qualified disaster recovery distributions treated as meeting plan distribution requirements For purposes of this title—

(I) a qualified disaster recovery distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A), and

(II) in the case of a money purchase pension plan, a qualified disaster recovery distribution which is an in-service withdrawal shall be treated as meeting the requirements of section 401(a) applicable to distributions.

(u) Treatment of annuity contracts not held by natural persons

(1) In general If any annuity contract is held by a person who is not a natural person—

For purposes of this paragraph, holding by a trust or other entity as an agent for a natural person shall not be taken into account.

(A) such contract shall not be treated as an annuity contract for purposes of this subtitle (other than subchapter L), and

(B) the income on the contract for any taxable year of the policyholder shall be treated as ordinary income received or accrued by the owner during such taxable year.

(2) Income on the contract

(A) In general For purposes of paragraph (1), the term “income on the contract” means, with respect to any taxable year of the policyholder, the excess of—

Where necessary to prevent the avoidance of this subsection, the Secretary may substitute “fair market value of the contract” for “net surrender value of the contract” each place it appears in the preceding sentence.

(i) the sum of the net surrender value of the contract as of the close of the taxable year plus all distributions under the contract received during the taxable year or any prior taxable year, reduced by

(ii) the sum of the amount of net premiums under the contract for the taxable year and prior taxable years and amounts includible in gross income for prior taxable years with respect to such contract under this subsection.

(B) Net premiums For purposes of this paragraph, the term “net premiums” means the amount of premiums paid under the contract reduced by any policyholder dividends.

(3) Exceptions This subsection shall not apply to any annuity contract which—

(A) is acquired by the estate of a decedent by reason of the death of the decedent,

(B) is held under a plan described in section 401(a) or 403(a), under a program described in section 403(b), or under an individual retirement plan,

(C) is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment),

(D) is purchased by an employer upon the termination of a plan described in section 401(a) or 403(a) and is held by the employer until all amounts under such contract are distributed to the employee for whom such contract was purchased or the employee’s beneficiary, or

(E) is an immediate annuity.

(4) Immediate annuity For purposes of this subsection, the term “immediate annuity” means an annuity—

(A) which is purchased with a single premium or annuity consideration,

(B) the annuity starting date (as defined in subsection (c)(4)) of which commences no later than 1 year from the date of the purchase of the annuity, and

(C) which provides for a series of substantially equal periodic payments (to be made not less frequently than annually) during the annuity period.

(v) 10-percent additional tax for taxable distributions from modified endowment contracts

(1) Imposition of additional tax If any taxpayer receives any amount under a modified endowment contract (as defined in section 7702A), the taxpayer’s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income.

(2) Subsection not to apply to certain distributions Paragraph (1) shall not apply to any distribution—

(A) made on or after the date on which the taxpayer attains age 59½,

(B) which is attributable to the taxpayer’s becoming disabled (within the meaning of subsection (m)(7)), or

(C) which is part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his beneficiary.

(w) Application of basis rules to nonresident aliens

(1) In general Notwithstanding any other provision of this section, for purposes of determining the portion of any distribution which is includible in gross income of a distributee who is a citizen or resident of the United States, the investment in the contract shall not include any applicable nontaxable contributions or applicable nontaxable earnings.

(2) Applicable nontaxable contribution For purposes of this subsection, the term “applicable nontaxable contribution” means any employer or employee contribution—

(A) which was made with respect to compensation—

(i) for labor or personal services performed by an employee who, at the time the labor or services were performed, was a nonresident alien for purposes of the laws of the United States in effect at such time, and

(ii) which is treated as from sources without the United States, and

(B) which was not subject to income tax (and would have been subject to income tax if paid as cash compensation when the services were rendered) under the laws of the United States or any foreign country.

(3) Applicable nontaxable earnings For purposes of this subsection, the term “applicable nontaxable earnings” means earnings—

(A) which are paid or accrued with respect to any employer or employee contribution which was made with respect to compensation for labor or personal services performed by an employee,

(B) with respect to which the employee was at the time the earnings were paid or accrued a nonresident alien for purposes of the laws of the United States, and

(C) which were not subject to income tax under the laws of the United States or any foreign country.

(4) Regulations The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this subsection, including regulations treating contributions and earnings as not subject to tax under the laws of any foreign country where appropriate to carry out the purposes of this subsection.

(x) Cross reference For limitation on adjustments to basis of annuity contracts sold, see section 1021.

(Aug. 16, 1954, ch. 736, 68A Stat. 20; Pub. L. 87–792, § 4(a), (b), Oct. 10, 1962, 76 Stat. 821; Pub. L. 87–834, § 11(b), Oct. 16, 1962, 76 Stat. 1005; Pub. L. 88–272, title II, § 232(b), Feb. 26, 1964, 78 Stat. 110; Pub. L. 89–44, title VIII, § 809(d)(2), June 21, 1965, 79 Stat. 167; Pub. L. 89–97, title I, § 106(d)(2), July 30, 1965, 79 Stat. 337; Pub. L. 89–365, § 1(b), Mar. 8, 1966, 80 Stat. 32; Pub. L. 91–172, title V, § 515(b), Dec. 30, 1969, 83 Stat. 644; Pub. L. 93–406, title II, §§ 2001(e)(5), (g)(1), (2)(A), (h)(2), (3), 2002(g)(10), 2005(c)(3), 2007(b)(2), Sept. 2, 1974, 88 Stat. 955, 957, 970, 991, 994; Pub. L. 94–455, title XIX, §§ 1901(a)(12), (13), 1906(b)(13)(A), 1951(b)(1)(A), Oct. 4, 1976, 90 Stat. 1765, 1834, 1836; Pub. L. 97–34, title III, §§ 311(b)(1), 312(d), (e)(1), Aug. 13, 1981, 95 Stat. 278, 284; Pub. L. 97–248, title II, §§ 236(a), (b), 237(d), 265(a), (b)(1), Sept. 3, 1982, 96 Stat. 509–511, 544–546; Pub. L. 97–448, title I, § 103(c)(3)(B)(i), (6), Jan. 12, 1983, 96 Stat. 2376; Pub. L. 98–76, title II, § 224(a), Aug. 12, 1983, 97 Stat. 421; Pub. L. 98–369, div. A, title II, §§ 211(b)(1), 222(a), (b), title IV, §§ 421(b)(1), 491(d)(3), (4), title V, §§ 521(d), 523(a), (b), title VII, § 713(b)(1)–(c)(1)(B), (d)(1), July 18, 1984, 98 Stat. 754, 774, 794, 849, 868, 871, 872, 956, 957; Pub. L. 98–397, title II, § 204(c)(2), Aug. 23, 1984, 98 Stat. 1448; Pub. L. 99–514, title XI, §§ 1101(b)(2)(B), (C), 1122(c), 1123(a), (b), (d)(1), 1134(a)–(d), 1135(a), title XVIII, §§ 1826(a), (b)(1)–(3), (c), (d), 1852(a)(2), (c)(1)–(4), 1854(b)(1), 1898(c)(1)(B), Oct. 22, 1986, 100 Stat. 2413, 2414, 2467, 2472, 2474, 2475, 2483, 2484, 2848–2850, 2864, 2867, 2878, 2951; Pub. L. 100–647, title I, §§ 1011A(b)(1)(A), (B), (2), (9), (c)(1)–(8), (h), (i), 1018(k), (t)(1)(A), (B), (u)(8), title V, § 5012(a), (b)(1), (d), Nov. 10, 1988, 102 Stat. 3472, 3474–3476, 3482, 3583, 3587, 3590, 3661, 3662, 3664; Pub. L. 101–239, title VII, §§ 7811(m)(4), 7815(a)(3), (5), Dec. 19, 1989, 103 Stat. 2412, 2414; Pub. L. 101–508, title XI, § 11802(a), Nov. 5, 1990, 104 Stat. 1388–529; Pub. L. 102–318, title V, § 521(b)(3), July 3, 1992, 106 Stat. 310; Pub. L. 104–188, title I, §§ 1403(a), 1421(b)(4)(A), 1463(a), 1704(l)(1), (t)(2), (77), Aug. 20, 1996, 110 Stat. 1790, 1796, 1824, 1882, 1887, 1891; Pub. L. 104–191, title III, § 361(a)–(c), Aug. 21, 1996, 110 Stat. 2071, 2072; Pub. L. 105–34, title II, § 203(a), (b), title III, § 303(a), (b), title X, § 1075(a), (b), Aug. 5, 1997, 111 Stat. 809, 829, 949; Pub. L. 105–206, title III, § 3436(a), title VI, §§ 6004(d)(3)(B), 6005(c)(1), 6023(3), (4), July 22, 1998, 112 Stat. 761, 794, 800, 824; Pub. L. 107–16, title IV, § 402(a)(4)(A), (B), title VI, §§ 632(a)(3)(A), 641(a)(2)(C), (e)(1), June 7, 2001, 115 Stat. 60, 61, 113, 120; Pub. L. 107–22, § 1(b)(1)(A), (3)(A), July 26, 2001, 115 Stat. 196, 197; Pub. L. 107–90, title II, § 204(e)(2), Dec. 21, 2001, 115 Stat. 893; Pub. L. 108–311, title II, § 207(6), (7), title IV, § 408(a)(4), (b)(3), Oct. 4, 2004, 118 Stat. 1177, 1191, 1192; Pub. L. 108–357, title VIII, § 906(a), Oct. 22, 2004, 118 Stat. 1653; Pub. L. 109–280, title VIII, §§ 827(a), 828(a), 844(a), Aug. 17, 2006, 120 Stat. 999, 1001, 1010; Pub. L. 110–245, title I, § 107(a), June 17, 2008, 122 Stat. 1631; Pub. L. 110–458, title I, § 108(e), Dec. 23, 2008, 122 Stat. 5109; Pub. L. 111–240, title II, § 2113(a), Sept. 27, 2010, 124 Stat. 2566; Pub. L. 112–141, div. F, title I, § 100121(c), July 6, 2012, 126 Stat. 914; Pub. L. 113–295, div. A, title II, § 221(a)(14), Dec. 19, 2014, 128 Stat. 4039; Pub. L. 114–26, § 2(a)–(c), June 29, 2015, 129 Stat. 319; Pub. L. 114–113, div. Q, title III, § 308(a), Dec. 18, 2015, 129 Stat. 3089; Pub. L. 116–94, div. O, title I, §§ 108(a), 113(a), Dec. 20, 2019, 133 Stat. 3149, 3154; Pub. L. 117–328, div. T, title I, §§ 115(a), 127(e)(2), (3), title III, §§ 308(a), (b), 311(a), 314(a), 323(a), (b), (d), 326(a), 329(a), 330(a), 331(a)(1), (2), (b)(1), (c)(1), 332(b)(1), 333(a), 334(c), title IV, § 401(b)(1), Dec. 29, 2022, 136 Stat. 5296, 5329, 5345, 5347, 5349, 5356, 5357, 5359–5361, 5364, 5365, 5367, 5368, 5370, 5388.)

Inflation Adjusted Items for Certain Years

For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.

Editorial Notes

References in Text

The enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, referred to in subsec. (f), means the enactment of Pub. L. 107–16, which was approved June 7, 2001.

The date of the enactment of the Small Business Job Protection Act of 1996, referred to in subsec. (n), is the date of enactment of Pub. L. 104–188, which was approved Aug. 20, 1996.

The Railroad Retirement Act of 1974, referred to in subsec. (r)(1), (2)(C)(i), (ii), is act Aug. 29, 1935, ch. 812, as amended generally by Pub. L. 93–445, title I, § 101, Oct. 16, 1974, 88 Stat. 1305, which is classified generally to subchapter IV (§ 231 et seq.) of chapter 9 of Title 45, Railroads. Sections 2(b), 3(h), and 4(e) and (h) of the Act are classified to sections 231a(b), 231b(h), and 231c(e) and (h), respectively, of Title 45. For further details and complete classification of this Act to the Code, see Codification note set out preceding section 231 of Title 45, section 231t of Title 45, and Tables.

The date of the enactment of this subparagraph, referred to in subsec. (t)(2)(G)(iv), is the date of enactment of Pub. L. 109–280, which was approved Aug. 17, 2006.

Section 1034 (as in effect on the day before the date of the enactment of this paragraph), referred to in subsec. (t)(8)(D)(i)(II), means section 1034 of this title as in effect on the day before Aug. 5, 1997. Section 1034 was repealed by Pub. L. 105–34, title III, § 312(b), Aug. 5, 1997, 111 Stat. 839.

The Robert T. Stafford Disaster Relief and Emergency Assistance Act, referred to in subsec. (t)(11)(E), (F)(i)(I), is Pub. L. 93–288, May 22, 1974, 88 Stat. 143, which is classified principally to chapter 68 (§ 5121 et seq.) of Title 42, The Public Health and Welfare. Section 401 of the Act is classified to section 5170 of Title 42. For complete classification of this Act to the Code, see Short Title note set out under section 5121 of Title 42 and Tables.

Section 301 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, referred to in subsec. (t)(11)(F)(i)(II), is section 301 of Pub. L. 116–260, div. EE, title III, Dec. 27, 2020, 134 Stat. 3070, which is not classified to the Code.

The date of the enactment of this paragraph, referred to in subsec. (t)(11)(F)(iii)(I), is the date of enactment of Pub. L. 117–328, which was approved Dec. 29, 2022.

Amendments

2022—Subsec. (d)(3). Pub. L. 117–328, § 127(e)(3), added par. (3).

Subsec. (p)(6). Pub. L. 117–328, § 331(c)(1), added par. (6).

Subsec. (q)(2). Pub. L. 117–328, § 323(d)(2), added concluding provisions.

Subsec. (q)(3). Pub. L. 117–328, § 323(b), designated existing provisions as subpar. (A) and inserted heading, redesignated former subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A), and cls. (i) and (ii) of former subpar. (B) as subcls. (I) and (II), respectively, of cl. (ii), and added subpar. (B).

Subsec. (t)(2)(A). Pub. L. 117–328, § 323(d)(1), added concluding provisions.

Subsec. (t)(2)(A)(ix). Pub. L. 117–328, § 333(a), added cl. (ix).

Subsec. (t)(2)(H)(v)(I). Pub. L. 117–328, § 311(a), substituted “may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make” for “may make”.

Subsec. (t)(2)(H)(vi)(IV). Pub. L. 117–328, § 401(b)(1), substituted “403(b)(7)(A)(i)” for “403(b)(7)(A)(ii)”.

Subsec. (t)(2)(I). Pub. L. 117–328, § 115(a), added subpar. (I).

Subsec. (t)(2)(J). Pub. L. 117–328, § 127(e)(2), added subpar. (J).

Subsec. (t)(2)(K). Pub. L. 117–328, § 314(a), added subpar. (K).

Subsec. (t)(2)(L). Pub. L. 117–328, § 326(a), added subpar. (L).

Subsec. (t)(2)(M). Pub. L. 117–328, § 331(a)(1), added subpar. (M).

Subsec. (t)(2)(N). Pub. L. 117–328, § 334(c), added subpar. (N).

Subsec. (t)(4)(C). Pub. L. 117–328, § 323(a), added subpar. (C).

Subsec. (t)(6). Pub. L. 117–328, § 332(b)(1), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B).

Subsec. (t)(8)(F). Pub. L. 117–328, § 331(b)(1), added subpar. (F).

Subsec. (t)(10). Pub. L. 117–328, § 308(b), substituted “and private sector firefighters” for “in governmental plans” in heading.

Subsec. (t)(10)(A). Pub. L. 117–328, § 329(a), substituted “age 50 or 25 years of service under the plan, whichever is earlier” for “age 50”.

Pub. L. 117–328, § 308(a), substituted “414(d)) or a distribution from a plan described in clause (iii), (iv), or (vi) of section 402(c)(8)(B) to an employee who provides firefighting services” for “414(d))”.

Subsec. (t)(10)(B)(i). Pub. L. 117–328, § 330(a), substituted “emergency medical services, or services as a corrections officer or as a forensic security employee providing for the care, custody, and control of forensic patients” for “or emergency medical services”.

Subsec. (t)(11). Pub. L. 117–328, § 331(a)(2), added par. (11).

2019—Subsec. (p)(2)(D), (E). Pub. L. 116–94, § 108(a), added subpar. (D) and redesignated former subpar. (D) as (E).

Subsec. (t)(2)(H). Pub. L. 116–94, § 113(a), added subpar. (H).

2015—Subsec. (t)(4)(A)(ii). Pub. L. 114–26, § 2(c), inserted “or a distribution to which paragraph (10) applies” after “other than by reason of death or disability” in introductory provisions.

Subsec. (t)(10)(A). Pub. L. 114–26, § 2(b), struck out “which is a defined benefit plan” after “section 414(d))”.

Subsec. (t)(10)(B). Pub. L. 114–26, § 2(a), substituted “means—” for “means”, designated remainder of existing provisions as cl. (i), and added cl. (ii).

Subsec. (t)(10)(B)(ii). Pub. L. 114–113 substituted “any air traffic controller” for “or any air traffic controller” and inserted before period at end “, any nuclear materials courier described in section 8331(27) or 8401(33) of such title, any member of the United States Capitol Police, any member of the Supreme Court Police, or any diplomatic security special agent of the Department of State”.

2014—Subsec. (c)(4). Pub. L. 113–295, § 221(a)(14)(A), struck out “; except that if such date was before January 1, 1954, then the annuity starting date is January 1, 1954” before period at end.

Subsec. (g)(3). Pub. L. 113–295, § 221(a)(14)(B), struck out “January 1, 1954, or” before “the first day”.

Pub. L. 113–295, § 221(a)(14)(B), which directed striking out “, whichever is later”, was executed by striking out “, whichever is the later” after “as an annuity” to reflect the probable intent of Congress.

2012—Subsec. (t)(2)(A)(viii). Pub. L. 112–141 added cl. (viii).

2010—Subsec. (a). Pub. L. 111–240 amended subsec. (a) generally. Prior to amendment, text read as follows: “Except as otherwise provided in this chapter, gross income includes any amount received as an annuity (whether for a period certain or during one or more lives) under an annuity, endowment, or life insurance contract.”

2008—Subsec. (t)(2)(G)(iv). Pub. L. 110–245, which directed amendment by striking out “, and before December 31, 2007” after “September 11, 2001”, was executed by striking out “, and on or before December 31, 2007” after “September 11, 2001”, to reflect the probable intent of Congress and the intervening amendment by Pub. L. 110–458. See Amendment note and Effective Date of 2008 Amendment note below.

Pub. L. 110–458 inserted “on or” before “before” in first sentence.

2006—Subsec. (e)(11), (12). Pub. L. 109–280, § 844(a), added par. (11) and redesignated former par. (11) as (12).

Subsec. (t)(2)(G). Pub. L. 109–280, § 827(a), added subpar. (G).

Subsec. (t)(10). Pub. L. 109–280, § 828(a), added par. (10).

2004—Subsec. (e)(9). Pub. L. 108–311, § 408(b)(3), amended Pub. L. 107–22, § 1(b)(3)(A). See 2001 Amendment note below.

Subsec. (f). Pub. L. 108–311, § 408(a)(4), substituted “Economic Growth and Tax Relief Reconciliation Act of 2001)” for “Economic Growth and Tax Relief Reconciliation Act of 2001” in concluding provisions.

Subsec. (t)(2)(D)(i)(III). Pub. L. 108–311, § 207(6), inserted “, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof” after “section 152”.

Subsec. (t)(7)(A)(iii). Pub. L. 108–311, § 207(7), substituted “152(f)(1)” for “151(c)(3)”.

Subsecs. (w), (x). Pub. L. 108–357 added subsec. (w) and redesignated former subsec. (w) as (x).

2001—Subsec. (e)(9). Pub. L. 107–22, § 1(b)(3)(A), as amended by Pub. L. 108–311, § 408(b)(3), substituted “Coverdell education savings” for “educational individual retirement” in heading.

Pub. L. 107–22, § 1(b)(1)(A), substituted “a Coverdell education savings” for “an education individual retirement”.

Pub. L. 107–16, § 402(a)(4)(A), (B), substituted “qualified tuition” for “qualified State tuition” in heading and text.

Subsec. (f). Pub. L. 107–16, § 632(a)(3)(A), substituted “section 403(b)(2)(D)(iii), as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001” for “section 403(b)(2)(D)(iii))” in concluding provisions.

Subsec. (o)(4). Pub. L. 107–16, § 641(e)(1), substituted “403(b)(8), 408(d)(3), and 457(e)(16)” for “and 408(d)(3)”.

Subsec. (r)(2)(B)(i). Pub. L. 107–90 substituted “3211(b)” for “3211(a)(2)”.

Subsec. (t)(9). Pub. L. 107–16, § 641(a)(2)(C), added par. (9).

1998—Subsec. (e)(9). Pub. L. 105–206, § 6004(d)(3)(B), added par. (9).

Subsec. (n). Pub. L. 105–206, § 6023(3), inserted “(as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996)” after “section 101(b)(2)(D)”.

Subsec. (t)(2)(A)(iv). Pub. L. 105–206, § 3436(a), which directed amendment of cl. (iv) by striking out “or” at end, could not be executed because the word “or” did not appear at end.

Subsec. (t)(2)(A)(vii). Pub. L. 105–206, § 3436(a), added cl. (vii).

Subsec. (t)(3)(A). Pub. L. 105–206, § 6023(4), substituted “(A)(v)” for “(A)(v),”.

Subsec. (t)(8)(E). Pub. L. 105–206, § 6005(c)(1), in introductory provisions, substituted “120th day” for “120 days” and “60th day” for “60 days”.

1997—Subsec. (d)(1)(B)(iii). Pub. L. 105–34, § 1075(b), inserted “If the annuity is payable over the life of a single individual, the number of anticipated payments shall be determined as follows:” before table and struck out “primary” after “If the age of the” in table.

Subsec. (d)(1)(B)(iv). Pub. L. 105–34, § 1075(a), added cl. (iv).

Subsec. (t)(2)(E). Pub. L. 105–34, § 203(a), added subpar. (E).

Subsec. (t)(2)(F). Pub. L. 105–34, § 303(a), added subpar. (F).

Subsec. (t)(7). Pub. L. 105–34, § 203(b), added par. (7).

Subsec. (t)(8). Pub. L. 105–34, § 303(b), added par. (8).

1996—Subsec. (b)(4)(A). Pub. L. 104–188, § 1704(l)(1), inserted “(determined without regard to subsection (c)(2))” after “contract”.

Subsec. (d). Pub. L. 104–188, § 1403(a), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “Treatment of Employee Contributions Under Defined Contribution Plans as Separate Contracts.—For purposes of this section, employee contributions (and any income allocable thereto) under a defined contribution plan may be treated as a separate contract.”

Subsec. (f). Pub. L. 104–188, § 1463(a), in closing provisions, inserted before period at end “, or to the extent such credits are attributable to services performed as a foreign missionary (within the meaning of section 403(b)(2)(D)(iii))”.

Subsec. (m)(2)(A) to (C). Pub. L. 104–188, § 1704(t)(2), inserted “and” at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “the consideration for the contract contributed by the employee for purposes of subsection (d)(1) (relating to employee’s contributions recoverable in 3 years) and subsection (e)(7) (relating to plans where substantially all contributions are employee contributions), and”.

Subsec. (p)(4)(A)(ii). Pub. L. 104–188, § 1704(t)(77), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “Special rules.—The term ‘qualified employer plan’—

“(I) shall include any plan which was (or was determined to be) a qualified employer plan or a government plan, but

“(II) shall not include a plan described in subsection (e)(7).”

Subsec. (t)(2)(B). Pub. L. 104–191, § 361(c), substituted “, (C), or (D)” for “or (C)”.

Subsec. (t)(2)(D). Pub. L. 104–191, § 361(b), added subpar. (D).

Subsec. (t)(3)(A). Pub. L. 104–191, § 361(a), struck out “(B),” after “Subparagraphs (A)(v),”.

Subsec. (t)(6). Pub. L. 104–188, § 1421(b)(4)(A), added par. (6).

1992—Subsec. (o)(4). Pub. L. 102–318 substituted “402(c)” for “402(a)(5), 402(a)(7)”.

1990—Subsec. (t)(2)(C), (D). Pub. L. 101–508, § 11802(a)(1), (2), redesignated subpar. (D) as (C) and struck out former subpar. (C) “Exceptions for distributions from employee stock ownership plans” which read as follows: “Any distribution made before January 1, 1990, to an employee from an employee stock ownership plan (as defined in section 4975(e)(7)) or a tax credit employee stock ownership plan (as defined in section 409) if—

“(i) such distribution is attributable to assets which have been invested in employer securities (within the meaning of section 409(l)) at all times during the 5-plan-year period preceding the plan year in which the distribution is made, and

“(ii) at all times during such period the requirements of sections 401(a)(28) and 409 (as in effect at such times) are met with respect to such employer securities.”

Subsec. (t)(3)(A). Pub. L. 101–508, § 11802(a)(3), substituted “and (C)” for “(C), and (D)”.

1989—Subsec. (e)(11)(A). Pub. L. 101–239, § 7815(a)(3), (5), substituted “calendar year” for “12-month period” in cls. (i) and (ii), and inserted at end “The preceding sentence shall not apply to any contract described in paragraph (5)(D).”

Subsec. (q)(2)(B). Pub. L. 101–239, § 7811(m)(4), inserted an additional closing parenthesis after “subsection (s)(6)(B))”.

1988—Subsec. (d). Pub. L. 100–647, § 1011A(b)(2)(A), added subsec. (d).

Subsec. (e)(4)(A). Pub. L. 100–647, § 5012(d)(1), inserted at end “The preceding sentence shall not apply for purposes of determining investment in the contract, except that the investment in the contract shall be increased by any amount included in gross income by reason of the amount treated as received under the preceding sentence.”

Subsec. (e)(5)(C). Pub. L. 100–647, § 5012(a)(2), substituted “Except as provided in paragraph (10) and except to the extent” for “Except to the extent”.

Subsec. (e)(5)(D). Pub. L. 100–647, § 1011A(b)(9)(B), substituted “paragraph (8)” for “paragraphs (7) and (8)”.

Subsec. (e)(7). Pub. L. 100–647, § 1011A(b)(9)(A), struck out par. (7) which related to special rules for plans where substantially all contributions are employee contributions.

Subsec. (e)(8)(A). Pub. L. 100–647, § 1011A(b)(9)(C), struck out “(other than paragraph (7))” after “this subsection”.

Subsec. (e)(9). Pub. L. 100–647, § 1011A(b)(2)(B), struck out par. (9) which related to treatment of employee contributions as separate contract.

Subsec. (e)(10). Pub. L. 100–647, § 5012(a)(1), added par. (10).

Subsec. (e)(11). Pub. L. 100–647, § 5012(d)(2), added par. (11).

Subsec. (f). Pub. L. 100–647, § 1011A(b)(1)(A), struck out “for purposes of subsections (d)(1) and (e)(7), the consideration for the contract contributed by the employee,” after “contract,” in introductory provisions.

Subsec. (n). Pub. L. 100–647, § 1011A(b)(1)(B), substituted “Subsection (b)” for “Subsections (b) and (d)”.

Subsec. (o)(2). Pub. L. 100–647, § 1011A(c)(8), struck out par. (2) which related to additional tax if amount received before age 59½.

Subsec. (p)(3)(A). Pub. L. 100–647, § 1011A(h)(1), inserted “to which paragraph (1) does not apply by reason of paragraph (2) during the period” after “loan”.

Subsec. (p)(3)(B). Pub. L. 100–647, § 1011A(h)(2), substituted “Period” for “Loans” in heading and amended text generally. Prior to amendment, text read as follows: “For purposes of subparagraph (A), a loan is described in this subparagraph—

“(i) if paragraph (1) does not apply to such loan by reason of paragraph (2), and

“(ii) if—

“(I) such loan is made to a key employee (as defined in section 416(i)), or

“(II) such loan is secured by amounts attributable to elective 401(k) or 403(b) deferrals (as defined in section 402(g)(3)).”

Subsec. (q)(2)(B). Pub. L. 100–647, § 1018(t)(1)(B), substituted “subsection (s)(6)(B))” for “subsection (s)(6)(B)))”.

Subsec. (q)(2)(D). Pub. L. 100–647, § 1011A(c)(7), inserted “designated” before “beneficiary”.

Pub. L. 100–647, §§ 1011A(c)(4), 1018(u)(8), amended subpar. (D) identically, substituting a comma for period at end.

Subsec. (q)(2)(E). Pub. L. 100–647, § 1011A(b)(9)(D), struck out “(determined without regard to subsection (e)(7))” after “subsection (e)(5)(D)”.

Subsec. (q)(2)(G). Pub. L. 100–647, § 1011A(c)(4), substituted a comma for period at end.

Subsec. (q)(2)(H). Pub. L. 100–647, § 1011A(c)(6), added subpar. (H).

Subsec. (q)(3)(B). Pub. L. 100–647, § 1011A(c)(5), substituted “taxpayer” for “employee” in cls. (i) and (ii).

Subsec. (s)(5). Pub. L. 100–647, § 1018(k)(2), substituted “certain annuity contracts” for “annuity contracts which are part of qualified plans” in heading.

Subsec. (s)(5)(D). Pub. L. 100–647, § 1018(k)(1), added subpar. (D).

Subsec. (s)(7). Pub. L. 100–647, § 1018(t)(1)(A), substituted “primary annuitant” for “primary annuity”.

Subsec. (t)(2)(A)(iv). Pub. L. 100–647, § 1011A(c)(7), inserted “designated” before “beneficiary”.

Subsec. (t)(2)(A)(v). Pub. L. 100–647, § 1011A(c)(1), struck out “on account of early retirement under the plan” after “separation from service”.

Subsec. (t)(2)(C). Pub. L. 100–647, § 1011A(c)(2), substituted “Exceptions for distributions from employee stock ownership plans” for “Certain plans” in heading and amended text generally. Prior to amendment, text read as follows:

“(i) In general.—Except as provided in clause (ii), any distribution made before January 1, 1990, to an employee from an employee stock ownership plan defined in section 4975(e)(7) to the extent that, on average, a majority of assets in the plan have been invested in employer securities (as defined in section 409(l)) for the 5-plan-year period preceding the plan year in which the distribution is made.

“(ii) Benefits distributed must be invested in employer securities for 5 years.—Clause (i) shall not apply to any distribution which is attributable to assets which have not been invested in employer securities at all times during the period referred to in clause (i).”

Subsec. (t)(3)(A). Pub. L. 100–647, § 1011A(c)(3), substituted “(C), and (D)” for “and (C)”.

Subsec. (u)(1)(A). Pub. L. 100–647, § 1011A(i)(1), inserted “(other than subchapter L)” after “subtitle”.

Subsec. (u)(3)(D). Pub. L. 100–647, § 1011A(i)(3), substituted “is purchased” for “which is purchased” and “is held” for “which is held”.

Pub. L. 100–647, § 1011A(i)(2), substituted “until all amounts under such contract are distributed to the employee for whom such contract was purchased or the employee’s beneficiary” for “until such time as the employee separates from service”.

Subsec. (u)(3)(E). Pub. L. 100–647, § 1011A(i)(3), substituted “is” for “which is”.

Subsec. (u)(4)(C). Pub. L. 100–647, § 1011A(i)(4), added subpar. (C).

Subsecs. (v), (w). Pub. L. 100–647, § 5012(b)(1), added subsec. (v) and redesignated former subsec. (v) as (w).

1986—Subsec. (b). Pub. L. 99–514, § 1122(c)(2), amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: “Gross income does not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract (as of the annuity starting date) bears to the expected return under the contract (as of such date). This subsection shall not apply to any amount to which subsection (d)(1) (relating to certain employee annuities) applies.”

Subsec. (d). Pub. L. 99–514, § 1122(c)(1), struck out subsec. (d) which related to employee’s annuities where the employee’s contributions were recoverable in 3 years.

Subsec. (e)(4)(C). Pub. L. 99–514, § 1826(b)(3), added subpar. (C).

Subsec. (e)(5)(D). Pub. L. 99–514, § 1122(c)(3)(B), substituted “paragraphs (7) and (8)” for “paragraph (7)” in introductory provisions.

Pub. L. 99–514, § 1854(b)(1), inserted closing provisions which read as follows: “Any dividend described in section 404(k) which is received by a participant or beneficiary shall, for purposes of this subparagraph, be treated as paid under a separate contract to which clause (ii)(I) applies.”

Subsec. (e)(7)(B). Pub. L. 99–514, § 1852(c)(1), in introductory provisions substituted “any plan or contract” for “any trust or contract”, in cl. (ii) substituted “85 percent or more of” for “85 percent of”, and inserted closing provision: “For purposes of clause (ii), deductible employee contributions (as defined in subsection (o)(5)(A)) shall not be taken into account.”

Subsec. (e)(8), (9). Pub. L. 99–514, § 1122(c)(3)(A), added pars. (8) and (9).

Subsec. (f). Pub. L. 99–514, § 1852(c)(3), in introductory provisions, substituted “subsections (d)(1) and (e)(7)” for “subsection (d)(1)” and “subsection (e)(6)” for “subsection (e)(1)(B)”.

Subsec. (m)(2)(B). Pub. L. 99–514, § 1852(c)(4)(A), inserted “and subsection (e)(7) (relating to plans where substantially all contributions are employee contributions)”.

Subsec. (m)(2)(C). Pub. L. 99–514, § 1852(c)(4)(B), substituted “subsection (e)(6)” for “subsection (e)(1)(B)”.

Subsec. (m)(5). Pub. L. 99–514, § 1852(a)(2)(C), which directed that par. (5) be amended by substituting “5-percent owners” for “owner-employees” in heading, was executed by substituting “5-percent owners” for “key employees”, to reflect the probable intent of Congress and intervening amendment by section 713(c)(1)(B) of Pub. L. 98–369.

Subsec. (m)(5)(A). Pub. L. 99–514, § 1123(d)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “This subparagraph shall apply—

“(i) to amounts which—

“(I) are received from a qualified trust described in section 401(a) or under a plan described in section 403(a), and

“(II) are received by a 5-percent owner before such owner attains the age of 59½ years, for any reason other than such owner becoming disabled (within the meaning of paragraph (7) of this section), and

“(ii) to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by a 5-percent owner, or by the successor of such owner, but only to the extent that such amounts are determined (under regulations prescribed by the Secretary) to exceed the benefits provided for such individual under the plan formula.

Clause (i) shall not apply to any amount received by an individual in his capacity as a policyholder of an annuity, endowment, or life insurance contract which is in the nature of a dividend or similar distribution and clause (i) shall not apply to amounts attributable to benefits accrued before January 1, 1985.”

Pub. L. 99–514, § 1852(a)(2)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “This paragraph shall apply—

“(i) to amounts (other than any amount received by an individual in his capacity as a policyholder of an annuity, endowment, or life insurance contract which is in the nature of a dividend or similar distribution) which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) and which are received by an individual, who is, or has been, a 5-percent owner, before such individual attains the age of 59½ years, for any reason other than the individual’s becoming disabled (within the meaning of paragraph (7) of this subsection), but only to the extent that such amounts are attributable to contributions paid on behalf of such individual (other than contributions made by him as a 5-percent owner) while he was a 5-percent owner, and

“(ii) to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by an individual who is, or has been, a 5-percent owner or by the successor of such individual, but only to the extent that such amounts are determined, under regulations prescribed by the Secretary, to exceed the benefits provided for such individual under the plan formula.”

Subsec. (m)(5)(C). Pub. L. 99–514, § 1852(a)(2)(B), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “For purposes of this paragraph, the term ‘5 percent owner’ have the same meanings as when used in section 416.”

Subsec. (m)(10). Pub. L. 99–514, § 1898(c)(1)(B), inserted “who is the spouse or former spouse of the participant”.

Subsec. (o)(5). Pub. L. 99–514, § 1101(b)(2)(C), inserted “and made for a taxable year beginning before January 1, 1987,” in subpar. (A), substituted “subsection (p)(3)(A)(i)” for “section 219(e)(3)” in subpar. (C), and substituted “subsection (p)(3)(B)” for “section 219(e)(4)” in subpar. (D).

Subsec. (p)(2)(A)(i). Pub. L. 99–514, § 1134(a), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: “$50,000, or”.

Subsec. (p)(2)(B)(ii). Pub. L. 99–514, § 1134(d), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “Clause (i) shall not apply to any loan used to acquire, construct, reconstruct, or substantially rehabilitate any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the participant or a member of the family (within the meaning of section 267(c)(4)) of the participant.”

Subsec. (p)(2)(C), (D). Pub. L. 99–514, § 1134(b), added subpar. (C) and redesignated former subpar. (C) as (D).

Subsec. (p)(3). Pub. L. 99–514, § 1134(c), added par. (3) and redesignated former par. (3) as (4).

Pub. L. 99–514, § 1101(b)(2)(B), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “For purposes of this subsection, the term ‘qualified employer plan’ means any plan which was (or was determined to be) a qualified employer plan (as defined in section 219(e)(3) other than a plan described in subsection (e)(7)). For purposes of this subsection, such term includes any government plan (as defined in section 219(e)(4)).”

Subsec. (p)(4), (5). Pub. L. 99–514, § 1134(c), redesignated former pars. (3) and (4) as (4) and 5, respectively.

Subsec. (q). Pub. L. 99–514, § 1123(b)(1)(B), substituted “10-percent” for “5-percent” in heading.

Subsec. (q)(1). Pub. L. 99–514, § 1123(b)(1)(A), substituted “10 percent” for “5 percent”.

Subsec. (q)(2). Pub. L. 99–514, § 1123(b)(3), substituted “Paragraph (1)” for “This subsection” in introductory provisions.

Subsec. (q)(2)(B). Pub. L. 99–514, § 1826(c), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “made to a beneficiary (or to the estate of an annuitant) on or after the death of an annuitant,”.

Subsec. (q)(2)(D). Pub. L. 99–514, § 1123(b)(2), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows: “which is one of a series of substantially equal periodic payments made for the life of a taxpayer or over a period extending for at least 60 months after the annuity starting date,”.

Subsec. (q)(2)(E). Pub. L. 99–514, § 1852(c)(2), inserted “(determined without regard to subsection (e)(7))”.

Subsec. (q)(2)(G). Pub. L. 99–514, § 1826(d), added subpar. (G).

Subsec. (q)(2)(I), (J). Pub. L. 99–514, § 1123(b)(4), which added subpars. (I) and (J) directed the amendment of subpar. (G) by striking out “or” at the end thereof, and of subpar. (H) by striking out the period at the end thereof, could not be executed to subpars. (G) and (H) because subpar. (G) does not contain “or”, and no subpar. (H) was enacted.

Subsec. (q)(3). Pub. L. 99–514, § 1123(b)(3), added par. (3).

Subsec. (s)(1). Pub. L. 99–514, § 1826(b)(2), substituted “any holder of such contract” for “the holder of such contract” in subpars. (A) and (B).

Subsec. (s)(5). Pub. L. 99–514, § 1826(a), added par. (5).

Subsec. (s)(6), (7). Pub. L. 99–514, § 1826(b)(1), added pars. (6) and (7).

Subsec. (t). Pub. L. 99–514, § 1123(a), added subsec. (t) and redesignated former subsec. (t) as (u).

Subsecs. (u), (v). Pub. L. 99–514, § 1135(a), added subsec. (u) and redesignated former subsec. (u) as (v).

1984—Subsec. (e)(5)(D). Pub. L. 98–369, § 523(b)(1), substituted “Except as provided in paragraph (7), this” for “This”.

Subsec. (e)(5)(D)(ii)(IV). Pub. L. 98–369, § 211(b)(1), which directed substitution of “section 818(a)(3)” for “805(d)(3)” in subpar. (D)(i)(IV), was executed to subpar. (D)(ii)(IV) to reflect the probable intent of Congress.

Subsec. (e)(7). Pub. L. 98–369, § 523(a), added par. (7).

Subsec. (k). Pub. L. 98–369, § 421(b)(1), repealed subsec. (k) relating to payments in discharge of alimony.

Subsec. (m)(5). Pub. L. 98–369, § 713(c)(1)(B), substituted “key employees” for “owner-employees” in heading.

Subsec. (m)(5)(A). Pub. L. 98–369, § 521(d)(1), (2), substituted “5-percent owner” for “key employee” wherever appearing and struck out “in a top-heavy plan” at end of cl. (i).

Pub. L. 98–369, § 713(c)(1)(A), substituted “as a key employee” for “as an owner-employee” in cl. (i).

Subsec. (m)(5)(C). Pub. L. 98–369, § 521(d)(3), substituted “the term ‘5 percent owner’ ” for “the terms ‘key employee’ and ‘top-heavy plan’ ”.

Subsec. (m)(9). Pub. L. 98–369, § 713(d)(1), repealed par. (9) relating to return of excess contributions before due date of return.

Subsec. (m)(10). Pub. L. 98–397 added par. (10).

Subsec. (o)(1). Pub. L. 98–369, § 491(d)(3), substituted “402 and 403” for “402, 403, and 405”.

Subsec. (o)(3)(A). Pub. L. 98–369, § 713(b)(1)(A), inserted “(other than the exception contained in paragraph (2) thereof)”.

Subsec. (o)(4). Pub. L. 98–369, § 491(d)(4), substituted “and 408(d)(3)” for “408(d)(3), and 409(b)(3)(C)”.

Subsec. (p)(2)(A). Pub. L. 98–369, § 713(b)(1)(B), inserted at end “For purposes of clause (ii), the present value of the nonforfeitable accrued benefit shall be determined without regard to any accumulated deductible employee contributions (as defined in subsection (o)(5)(B)).”

Subsec. (p)(2)(A)(ii). Pub. L. 98–369, § 713(b)(4), substituted as cl. (ii) “the greater of (I) one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan, or (II) $10,000” for “½ of the present value of the nonforfeitable accrued benefit of the employee under the plan (but not less than $10,000)”.

Subsec. (p)(3). Pub. L. 98–369, § 523(b)(2), inserted “other than a plan described in subsection (e)(7)”.

Subsec. (q)(1). Pub. L. 98–369, § 222(a), amended par. (1) generally, striking out designation “(A) In general.—” preceding text, substituting “which is includible in gross income” for “includible in gross income which is properly allocable to any investment in the annuity contract made during the 10-year period ending on the date such amount was received by the taxpayer”, and striking out former subpar. (B), which had provided that for purposes of subpar. (A), the amount includible in gross income would be allocated to the earliest investment in the contract with respect to which amounts had not been previously fully allocated under this par.

Subsecs. (s), (t). Pub. L. 98–369, § 222(b), added subsec. (s) and redesignated former subsec. (s) as (t).

1983—Subsec. (o)(2)(A). Pub. L. 97–448, § 103(c)(6), struck out “to which the employee made one or more deductible employee contributions” after “from a qualified employer plan or government plan”.

Subsec. (p)(3). Pub. L. 97–448, § 103(c)(3)(B)(i), struck out “without regard to subparagraph (D) thereof” after “as defined in section 219(e)(3)”.

Subsecs. (r), (s). Pub. L. 98–76 added subsec. (r) and redesignated former subsec. (r) as (s).

1982—Subsec. (e). Pub. L. 97–248, § 265(a), in par. (1) substituted provisions relating to the application of this subsection to amounts received under annuity, endowment, or life insurance contracts which are not received as annuities and to amounts received as dividends for provisions which stated a general rule relating to the includability as gross income of amounts that were received under annuity, endowment, or life insurance contracts which were not received as annuities and also stated that for the purposes of this section amounts which were received as dividends would be treated as amounts not received as an annuity, in par. (2) substituted provisions stating a general rule as to the includability as gross income of amounts received before or after the annuity starting date for provisions which set out those amounts which would be treated as amounts not received as an annuity, and added pars. (3) to (6).

Subsec. (m)(4). Pub. L. 97–248, § 236(b)(1), struck out par. (4) which related to amounts constructively received with respect to assignments or pledges, and loans on contracts.

Subsec. (m)(5). Pub. L. 97–248, § 237(d)(1), (2), in subpar. (A) substituted applicability to key employees for applicability to owner-employees and added subpar. (C).

Subsec. (m)(6). Pub. L. 97–248, § 237(d)(3), struck out “except in applying paragraph (5),” after “shall”.

Subsec. (m)(8). Pub. L. 97–248, § 236(b)(1), struck out par. (8) which related to loans to owner-employees.

Subsec. (o)(3)(A). Pub. L. 97–248, § 236(b)(2), substituted reference to subsec. (p) of this section for references to subsec. (m)(4) and (8) of this section.

Subsec. (p). Pub. L. 97–248, § 236(a), added subsec. (p). Former subsec. (p) redesignated (q).

Subsec. (q). Pub. L. 97–248, § 265(b)(1), added subsec. (q). Former subsec. (q) redesignated (r).

Pub. L. 97–248, § 236(a), redesignated former subsec. (p) as (q).

Subsec. (r). Pub. L. 97–248, §§ 236(a), 265(b)(1), redesignated former subsec. (p) as (r).

1981—Subsec. (m)(6). Pub. L. 97–34, § 312(d)(1), expanded definition of “owner-employee” to include an employee within the meaning of section 401(c)(1) except in applying paragraph (5).

Subsec. (m)(8). Pub. L. 97–34, § 312(d)(2), added par. (8).

Subsec. (m)(9). Pub. L. 97–34, § 312(e)(1), added par. (9).

Subsecs. (o), (p). Pub. L. 97–34, § 311(b)(1), added subsec. (o) and redesignated former subsec. (o) as (p).

1976—Subsec. (c)(2), (3)(A). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (d)(1). Pub. L. 94–455, § 1901(a)(12), struck out in subpar. (B) “(whether or not before January 1, 1954)” after “beginning on the date”, and in provisions following subpar. (B) struck out “(under this paragraph and prior income tax laws)” after “until there has been so excluded”.

Subsec. (f). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (i). Pub. L. 94–455, § 1951(b)(1)(A), struck out subsec. (i) which related to joint annuities where first annuitant died in 1951, 1952, or 1953.

Subsec. (m)(2), (3). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (m)(4)(A). Pub. L. 94–455, § 1901(a)(13), substituted “an individual retirement account” for “an individual retirement amount”.