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(Added , title I, § 141(a), Nov. 6, 1978, , § 409A; amended , title I, § 101(a)(7)(D)–(F), (I), (J), (L)(i)(VI), (ii)(I), (II), (iii)(V), (v)(VI), (VII), Apr. 1, 1980, ; , title II, § 224(a), Dec. 28, 1980, ; , title III, §§ 331(c)(1), , , , Aug. 13, 1981, , 297, 298; , title I, § 103(h), (i), Jan. 12, 1983, ; renumbered § 409 and amended , div. A, title IV, §§ 474(r)(15), 491 (e)(1), July 18, 1984, , 852; , title XI, §§ 1172(b)(1), 1174 (a)(1), (b)(1), (2), (c)(1)(A), 1176 (b), title XVIII, §§ 1852(a)(4)(B), 1854 (a)(3)(A), (f)(1), (3)(C), 1899A (11), Oct. 22, 1986, , 2516, 2517, 2520, 2865, 2873, 2881, 2882, 2958; , title I, §§ 1011B(g)(1), (2), (i)(1), (3), (j)(3), (5), (k)(3), , (C), (H), Nov. 10, 1988, , 3492, 3493, 3588, 3589; , title VII, §§ 7304(a)(2)(A), (B), , Dec. 19, 1989, , 2353, 2409; , title XV, § 1506(a), Aug. 5, 1997, ; , title VI, § 656(a), June 7, 2001, ; , title IV, § 411(j)(2), Mar. 9, 2002, .)

Amendment of Section
For termination of amendment by section 901 of , see Effective and Termination Dates of 2001 Amendment note below.

References in Text
Section , referred to in subsecs. (b)(1)(A), (4), (g), (i)(1)(A), (m), and (p), which related to employee stock ownership credit, was repealed by , title XI, § 1171(a), Oct. 22, 1986, . Section of this title, relating to credit for increasing research activities, was renumbered section . Section 12 of the Securities Exchange Act of 1934, referred to in subsec. (e)(4), is classified to section of Title , Commerce and Trade. Section 403(c)(1) of the employee Retirement Income Security Act of 1974, referred to in subsecs. (j) and (k), is classified to section of Title , Labor. The enactment of the Tax Reform Act of 1984, referred to in subsecs. (g) and (k), means the enactment of div. A of , which was approved July 18, 1984. Subsec. (n) of section , referred to in subsecs. (g), (m), and (p)(1), was repealed by section 474(o)(15) of . Section , referred to in subsec. (p)(2), was repealed by , title XI, § 1171(b)(7)(A), Oct. 22, 1986, .

Prior Provisions
A prior section , added , title II, § 2002(c), Sept. 2, 1974, ; amended , title XV, § 1501(b)(6), title XIX, §§ 1901(a)(60), 1906 (b)(13)(A), Oct. 4, 1976, , 1774, 1834; , title I, §§ 156(c)(2), (3), 157 (e)(1)(B), Nov. 6, 1978, , 2806; , title I, § 101(a)(14)(B), Apr. 1, 1980, ; , title III, § 311(g)(1)(D), (3), Aug. 13, 1981, ; , title II, § 243(b)(1)(B), title III, § 335(a)(2), Sept. 3, 1982, , 628; , § 2(c)(1), Jan. 12, 1983, ; , div. A, title I, § 42(a)(7), title V, § 522(d)(13), July 18, 1984, , 871, related to retirement bonds, prior to repeal by , div. A, title IV, § 491(b), (f)(1), July 18, 1984, , 853, applicable to obligations issued after Dec. 31, 1983.

Amendments
2002—Subsec. (o)(1)(C)(ii). substituted “$800,000” for “$500,000” in two places and “$160,000” for “$100,000”. 2001—Subsecs. (p), (q). , §§ 656(a), , temporarily added subsec. (p) and redesignated former subsec. (p) as (q). See Effective and Termination Dates of 2001 Amendment note below. 1997—Subsec. (h)(2). designated existing provisions as subpar. (A), inserted subpar. heading, struck out “In the case of an employer whose charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or to a trust described in section , a plan which otherwise meets the requirements of this subsection or section shall not be considered to have failed to meet the requirements of this subsection or of section merely because it does not permit a participant to exercise the right described in paragraph (1)(A) if such plan provides that participants entitled to a distribution from the plan shall have a right to receive such distribution in cash, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of paragraph (1)(B).” after “employer securities.”, and added subpar. (B). 1989—Subsec. (l)(5). , § 7811(h)(1), substituted “the second sentence” for “the last sentence”. Subsec. (n)(1). , § 7304(a)(2)(A)(i), struck out “or section ” after “section ” in two places in introductory provisions. Subsec. (n)(1)(A)(i). , § 7304(a)(2)(A)(ii), struck out “or any decedent if the executor of the estate of such decedent makes a qualified sale to which section applies” after “employer securities,”. Subsec. (n)(1)(A)(ii). , § 7304(a)(2)(A)(iii), struck out “or the decedent” after “the taxpayer”. Subsec. (n)(2)(C)(i), (3)(A)(ii). , § 7304(a)(2)(B), struck out “or section ” after “section ”. 1988—Subsec. (d). , § 1011B(j)(3), inserted “or to any distribution or reinvestment required under section ” after “under section ”. Subsec. (e)(5). , § 1018(t)(4)(H), substituted “paragraph (3)” for “paragraph (2) or (3)”. Subsec. (h)(2). , § 1018(t)(4)(B), substituted “paragraph (1)(B)” for “section ”. Subsec. (h)(7). , § 1011B(j)(5), added par. (7). Subsec. (l)(4), (5). , § 1011B(k)(3), redesignated par. (4), relating to nonvoting common stock may be acquired in certain cases, as (5). Subsec. (n)(1). , § 1011B(g)(1), made technical amendment to directory language of , § 1172(b)(1). See 1986 Amendment note below. Subsec. (n)(2)(C)(i), (3)(A)(ii). , § 1011B(g)(2), inserted “or section ” after “which section ”. Subsec. (n)(3)(C). , § 1018(t)(4)(C), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “The term ‘nonallocation period’ means the 10-year period beginning on the later of— “(i) the date of the sale of the qualified securities, or “(ii) the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.” Subsec. (o)(1)(A). , § 1011B(i)(3), substituted “if the participant and, if applicable pursuant to sections and , with the consent of the participant’s spouse elects” for “unless the participant otherwise elects”. Subsec. (o)(1)(A)(ii). , § 1011B(i)(1), substituted “distribution is required to begin under this clause” for “such year”. 1986—Subsec. (a)(3). , § 1174(b)(2), inserted reference to subsec. (o). Subsec. (d). , § 1899A(11), substituted “participant’s” for “participants’s”. , § 1852(a)(4)(B), inserted at end “This subsection shall not apply to any distribution required under section .” Subsec. (d)(1). , § 1174(a)(1), substituted “separation from service, or termination of the plan” for “or separation from service”. Subsec. (e)(2). , § 1854(f)(1)(C), (D), inserted “or beneficiary” after “participant” in two places and substituted “securities of the employer” for “employer securities”. Subsec. (e)(3). , § 1854(f)(1)(B)–(D), inserted “or beneficiary” after “participant” in two places and substituted “securities of the employer” for “employer securities” and “any corporate matter which involves the voting of such shares with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary may prescribe in regulations” for “a corporate matter which (by law or charter) must be decided by more than a majority vote of outstanding common shares voted”. Subsec. (e)(5). , § 1854(f)(1)(A), added par. (5). Subsec. (h)(2). , § 1854(f)(3)(C), inserted “, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of section ”. Subsec. (h)(5), (6). , § 1174(c)(1)(A), added pars. (5) and (6). Subsec. (l)(4). , § 1176(b), added par. (4) relating to acquisition of nonvoting common stock. Subsec. (n). , § 1854(a)(3)(A), added subsec. (n). Former subsec. (n) redesignated (o). Subsec. (n)(1). , § 1172(b)(1), as amended by , § 1011B(g)(1), inserted “or section ” in two places in introductory provisions, “or any decedent if the executor of the estate of such decedent makes a qualified sale to which section applies,” in subpar. (A)(i), and “or the decedent” in subpar. (A)(ii). Subsec. (o). , § 1174(b)(1), added subsec. (o). Former subsec. (o) redesignated (p). , § 1854(a)(3)(A), redesignated former subsec. (n) as (o). Subsec. (p). , § 1174(b)(1), redesignated former subsec. (o) as (p). 1984—Subsec. (b)(1)(A). , § 474(r)(15)(A), (B), substituted “41” for “44G” and struck out “48(n)(1)(A) or” after “requirements of section”. Subsec. (b)(4). , § 474(r)(15)(A), substituted “41” for “44G”. Subsec. (g). , § 474(r)(15)(A), (C), substituted “41” for “44G” in two places, and inserted provision directing that, for purposes of the preceding sentence, the references to section and the employee plan credit shall refer to such section and credit as in effect before the enactment of the Tax Reform Act of 1984. Subsec. (i)(1)(A). , § 474(r)(15)(A), (D), substituted “41” for “44G”, and struck out “48(n)(1) or” after “taxable year under section”. Subsec. (k). , § 474(r)(15)(E), inserted provision requiring that, for purposes of this subsection, the reference to the matching employee plan credit refer to such credit as in effect before the enactment of the Tax Reform Act of 1984. Subsec. (m). , § 474(r)(15)(A), substituted “41” for “44G”. Subsec. (n)(3). , § 474(r)(15)(A), substituted “41” for “44G”. 1983—Subsec. (d)(2). , § 103(i), struck out provisions covering the sale of substantially all of the stock of a subsidiary of the employer. Subsec. (h)(2). , § 103(h), substituted “the requirements of this subsection or of section ” for “the requirements of section ”. 1981—Subsec. (b). , § 331(c)(1)(A), (B), inserted in par. (1)(A) reference to section , and inserted in par. (4) “or the credit allowed under section (relating to the employee stock ownership credit)” after “basic employee plan credit”. Subsec. (d). , § 337, designated provision relating to death, disability, or separation from service as par. (1) and added pars. (2) and (3). Subsec. (g). , § 331(c)(1)(C), (D), inserted reference to section and inserted “or the credit allowed under section (relating to employee stock ownership credit)” after “employee plan credit”. Subsec. (h)(2). , § 334, substituted “this subsection” for “this section” and inserted provision respecting receipt of distributions in cash where employer’s charter or bylaws restrict ownership of substantially all outstanding employer securities to employees or to a section trust where a participant is not permitted to exercise the right described in par. (1)(A). Subsec. (h)(3), (4). , § 336, added pars. (3) and (4). Subsec. (i)(1)(A). , § 331(c)(1)(E), inserted reference to section . Subsec. (m). , § 331(c)(1)(F), inserted reference to section . Subsec. (n)(2), (3). , § 331(c)(1)(G), (H), inserted “or employee stock ownership credit” after “employee plan credit” in par. (2) and added par. (3). 1980—, § 101(a)(7)(L)(v)(VII), substituted “tax credit employee stock ownership plans” for “ESOPS” in section catchline. Subsec. (a). , § 101(a)(7)(L)(ii)(I), (v)(VI), substituted in heading and in text “tax credit employee stock ownership plan” for “ESOP”. Subsec. (b)(4). , § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”. Subsec. (d). , § 101(a)(7)(F), inserted “(or allocated to a participant’s account in connection with matched employer and employee contributions)” after “under subsection (b)”. Subsec. (f)(1). , § 101(a)(7)(I)(i), substituted “only if it is established on or before the due date (including any extension of such date) for the filing of the employer’s tax return for the first taxable year of the employer for which an employee plan credit is claimed by the employer with respect to the plan” for “for a plan year only if it is established on or before the due date for the filing of the employer’s tax return for the taxable year (including any extension of such date) in which or with which the plan year ends”. Subsec. (f)(2). , § 101(a)(7)(I)(ii), (L)(v)(VII), substituted “employee plan” for “ESOP” and inserted “with respect to the plan” after “by the employer”. Subsec. (g). , § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”. Subsec. (h)(2). , § 101(a)(7)(E), inserted “or of section ” after “the requirements of this section”. Subsecs. (j)(2), (k)(1). , § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”. Subsec. (l)(2)(B). , § 101(a)(7)(J)(i), substituted “class of common stock” for “class of stock”. Subsec. (l)(3). , § 101(a)(7)(J)(ii), (L)(ii)(II), substituted “as employer securities” for “as meeting the requirements of paragraph (1)”, “paragraph (1) or (2)” for “paragraph (2)”, and “tax credit employee stock ownership plan” for “ESOP” and inserted provisions requiring preferred stock to be treated as noncallable if after the call there will be a reasonable opportunity for a conversion which meets the requirements of the preceding sentence. Subsec. (l)(4). substituted in heading “Application to controlled group of corporations” for “Controlled group of corporations defined” and in subpar. (B) heading “Where common parent owns at least” for “Common parent may own only” and added subpar. (C). Subsec. (m). , § 101(a)(7)(D), (L)(i), substituted provisions relating to nonrecognition of gain or loss on contribution of employer securities to a tax credit employee stock ownership plan for provisions relating to contributions of stock of a controlling corporation. Subsec. (n). , § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit” in pars. (1) and (2).

Effective Date of 2002 Amendment
Amendment by effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, , to which such amendment relates, see section 411(x) of , set out as a note under section of this title.

Effective and Termination Dates of 2001 Amendment
, title VI, § 656(d), June 7, 2001, , provided that: “(1) In general.—The amendments made by this section [amending this section and sections and of this title] shall apply to plan years beginning after December 31, 2004. “(2) Exception for certain plans.—In the case of any— “(A) employee stock ownership plan established after March 14, 2001, or “(B) employee stock ownership plan established on or before such date if employer securities held by the plan consist of stock in a corporation with respect to which an election under section 1362(a) of the Internal Revenue Code of 1986 is not in effect on such date, the amendments made by this section shall apply to plan years ending after March 14, 2001.” Amendment by inapplicable to taxable, plan, or limitation years beginning after Dec. 31, 2010, and the Internal Revenue Code of 1986 to be applied and administered to such years as if such amendment had never been enacted, see section 901 of , set out as a note under section of this title.

Effective Date of 1997 Amendment
Section 1506(c) of provided that: “The amendments made by this section [amending this section, section of this title, and section of Title , Labor] shall apply to taxable years beginning after December 31, 1997.”

Effective Date of 1989 Amendment
Section 7304(a)(3) of provided that: “The amendments made by this subsection [amending this section and sections and of this title and repealing sections and of this title] shall apply to the estates of decedents dying after the date of the enactment of this Act [Dec. 19, 1989].” Amendment by section 7811(h)(1) of effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see section 7817 of , set out as a note under section of this title.

Effective Date of 1988 Amendment
Amendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see section 1019(a) of , set out as a note under section of this title.

Effective Date of 1986 Amendment
Section 1172(c) of provided that: “The amendments made by this section [enacting section of this title and amending this section and section of this title] shall apply to sales after the date of the enactment of this Act [Oct. 22, 1986] with respect to which an election is made by the executor of an estate who is required to file the return of the tax imposed by the Internal Revenue Code of 1986 on a date (including extensions) after the date of the enactment of this Act.” Section 1174(a)(2) of , as amended by , title I, § 1011B(i)(2), Nov. 10, 1988, , provided that: “The amendment made by this subsection [amending this section] shall apply to distributions after December 31, 1984.” Section 1174(b)(3) of provided that: “The amendments made by this subsection [amending this section] shall apply to distributions attributable to stock acquired after December 31, 1986.” Section 1174(c)(1)(B) of provided that: “The amendment made by this paragraph [amending this section] shall apply to distributions attributable to stock acquired after December 31, 1986, except that a plan may elect to have such amendment apply to all distributions after the date of the enactment of this Act [Oct. 22, 1986].” Amendment by section 1176(b) of applicable to acquisitions of securities after Dec. 31, 1986, see section 1176(c) of , set out as a note under section of this title. Amendment by section 1852(a)(4)(B) of effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , div. A, to which such amendment relates, see section 1881 of , set out as a note under section of this title. Section 1854(a)(3)(C) of , as amended by , title I, § 1018(t)(4)(G), Nov. 10, 1988, , provided that: “(i) Except as provided in clause (ii), the amendments made by this paragraph [amending this section and section of this title] shall apply to sales of securities after the date of the enactment of this Act [Oct. 22, 1986]. “(ii) A taxpayer or executor may elect to have section 1042(b)(3) of the Internal Revenue Code of 1954 (as in effect before the amendment made by subparagraph (B)) apply to sales before the date of the enactment of this Act as if such section included the last sentence of section 409(n)(1) of the Internal Revenue Code of 1986 (as added by subparagraph (A)).” Section 1854(f)(4)(A), (B) of provided that: “(A) The amendments made by paragraph (1)(A) and (3) [amending this section and sections and of this title] shall take effect on the date of the enactment of this Act [Oct. 22, 1986].” “(B) The amendments made by subparagraphs (B), (C), and (D) of paragraph (1) [amending this section] shall apply after December 31, 1986, to stock acquired after December 31, 1979.”

Effective Date of 1984 Amendment
Amendment by section 474(r)(15) of applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of , set out as a note under section of this title. Redesignation of section as by section 491(e)(1) of effective Jan. 1, 1984, see section 491(f)(3) of , set out as a note under section of this title.

Effective Date of 1983 Amendment
Amendment by effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, , to which such amendment relates, see section 109 of , set out as a note under section of this title.

Effective Date of 1981 Amendment
Amendment by section 331(c)(1) of applicable to taxable years ending after Dec. 31, 1982, see section 331(f)(2) of , set out as a note under section of this title. Section 337(b) of , as amended by , § 2, Oct. 22, 1986, , provided that: “The amendments made by this section [amending this section] shall apply to distributions described in section 409A(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (or any corresponding provision of prior law) made after March 29, 1975.” Amendment by sections 334 and 336 of applicable to taxable years beginning after Dec. 31, 1981, see section 339 of , set out as a note under section of this title.

Effective Date of 1980 Amendments
Section 224(b) of provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to qualified investment for taxable years beginning after December 31, 1978.” Amendment by effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, , to which such amendment relates, see section 201 of , set out as a note under section of this title.

Effective Date
Section 141(g) of , as added by , title I, § 101(a)(7)(B), Apr. 1, 1980, ; amended by , § 2, Oct. 22, 1986, , provided that: “(1) In general.—Except as otherwise provided in this subsection and subsection (h) [set out as an Effective Date of 1978 Amendment note under section of this title], the amendments made by this section [enacting sections [now 409] and 6699 of this title and amending sections , , , , , , , , and of this title] shall apply with respect to qualified investment for taxable years beginning after December 31, 1978. “(2) Election to have amendments apply during 1978.—At the election of the taxpayer, paragraph (1) shall be applied by substituting ‘December 31, 1977’ for ‘December 31, 1978’; except that in the case of a plan in existence before December 31, 1978, any such election shall not affect the required allocation of employer securities attributable to qualified investment for taxable years beginning before January 1, 1979. An election under the preceding sentence shall be made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe. Such an election, once made, shall be irrevocable. “(3) Voting right provisions.—Section 409A(e) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)) [now section ] shall apply to plans to which section 409A of such Code applies, beginning with the first day of such application. “(4) Right to demand employer securities, etc.—Paragraphs (1)(A) and (2) of section 409A(h) of the Internal Revenue Code of 1986 (as added by subsection (a)) [now section ] shall apply to distributions after December 31, 1978, made by a plan to which section 409A of such Code applies. “(5) Subsection (f)(7).—The amendment made by subsection (f)(7) [amending section of this title] shall apply to years beginning after December 31, 1978. “(6) Retroactive application of amendment made by subsection (d).—In determining the regular tax deduction under section 56(c) of the Internal Revenue Code of 1986 for any taxable year beginning before January 1, 1979, the amount of the credit allowable under section 38 of such Code shall be determined without regard to section 46(a)(2)(B) of such Code (as in effect before the enactment of the Energy Tax Act of 1978 [Nov. 9, 1978]).”

Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of 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 , as amended, set out as a note under section of this title.

Section Referred to in Other Sections
This section is referred to in sections , , , , , , , , , , , of this title; title section ; title sections , .

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