§ 4971. — Taxes on failure to meet minimum funding standards.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 26USC4971]
TITLE 26--INTERNAL REVENUE CODE
Subtitle D--Miscellaneous Excise Taxes
CHAPTER 43--QUALIFIED PENSION, ETC., PLANS
Sec. 4971. Taxes on failure to meet minimum funding standards
(a) Initial tax
For each taxable year of an employer who maintains a plan to which
section 412 applies, there is hereby imposed a tax of 10 percent (5
percent in the case of a multiemployer plan) on the amount of the
accumulated funding deficiency under the plan, determined as of the end
of the plan year ending with or within such taxable year.
(b) Additional tax
In any case in which an initial tax is imposed by subsection (a) on
an accumulated funding deficiency and such accumulated funding
deficiency is not corrected within the taxable period, there is hereby
imposed a tax equal to 100 percent of such accumulated funding
deficiency to the extent not corrected.
(c) Definitions
For purposes of this section--
(1) Accumulated funding deficiency
The term ``accumulated funding deficiency'' has the meaning
given to such term by the last two sentences of section 412(a).
(2) Correct
The term ``correct'' means, with respect to an accumulated
funding deficiency, the contribution, to or under the plan, of the
amount necessary to reduce such accumulated funding deficiency as of
the end of a plan year in which such deficiency arose to zero.
(3) Taxable period
The term ``taxable period'' means, with respect to an
accumulated funding deficiency, the period beginning with the end of
the plan year in which there is an accumulated funding deficiency
and ending on the earlier of--
(A) the date of mailing of a notice of deficiency with
respect to the tax imposed by subsection (a), or
(B) the date on which the tax imposed by subsection (a) is
assessed.
(d) Notification of the Secretary of Labor
Before issuing a notice of deficiency with respect to the tax
imposed by subsection (a) or (b), the Secretary shall notify the
Secretary of Labor and provide him a reasonable opportunity (but not
more than 60 days)--
(1) to require the employer responsible for contributing to or
under the plan to eliminate the accumulated funding deficiency, or
(2) to comment on the imposition of such tax.
In the case of a multiemployer plan which is in reorganization under
section 418, the same notice and opportunity shall be provided to the
Pension Benefit Guaranty Corporation.
(e) Liability for tax
(1) In general
Except as provided in paragraph (2), the tax imposed by
subsection (a), (b), or (f) shall be paid by the employer
responsible for contributing to or under the plan the amount
described in section 412(b)(3)(A).
(2) Joint and several liability where employer member of
controlled group
(A) In general
In the case of a plan other than a multiemployer plan, if
the employer referred to in paragraph (1) is a member of a
controlled group, each member of such group shall be jointly and
severally liable for the tax imposed by subsection (a), (b), or
(f).
(B) Controlled group
For purposes of subparagraph (A), the term ``controlled
group'' means any group treated as a single employer under
subsection (b), (c), (m), or (o) of section 414.
(f) Failure to pay liquidity shortfall
(1) In general
In the case of a plan to which section 412(m)(5) applies, there
is hereby imposed a tax of 10 percent of the excess (if any) of--
(A) the amount of the liquidity shortfall for any quarter,
over
(B) the amount of such shortfall which is paid by the
required installment under section 412(m) for such quarter (but
only if such installment is paid on or before the due date for
such installment).
(2) Additional tax
If the plan has a liquidity shortfall as of the close of any
quarter and as of the close of each of the following 4 quarters,
there is hereby imposed a tax equal to 100 percent of the amount on
which tax was imposed by paragraph (1) for such first quarter.
(3) Definitions and special rule
(A) Liquidity shortfall; quarter
For purposes of this subsection, the terms ``liquidity
shortfall'' and ``quarter'' have the respective meanings given
such terms by section 412(m)(5).
(B) Special rule
If the tax imposed by paragraph (2) is paid with respect to
any liquidity shortfall for any quarter, no further tax shall be
imposed by this subsection on such shortfall for such quarter.
(4) Waiver by Secretary
If the taxpayer establishes to the satisfaction of the Secretary
that--
(A) the liquidity shortfall described in paragraph (1) was
due to reasonable cause and not willful neglect, and
(B) reasonable steps have been taken to remedy such
liquidity shortfall,
the Secretary may waive all or part of the tax imposed by this
subsection.
(g) Cross references
For disallowance of deduction for taxes paid under this
section, see section 275.
For liability for tax in case of an employer party to
collective bargaining agreement, see section 413(b)(6).
For provisions concerning notification of Secretary of Labor
of imposition of tax under this section, waiver of the tax
imposed by subsection (b), and other coordination between
Secretary of the Treasury and Secretary of Labor with respect to
compliance with this section, see section 3002(b) of title III
of the Employee Retirement Income Security Act of 1974.
(Added Pub. L. 93-406, title II, Sec. 1013(b), Sept. 2, 1974, 88 Stat.
920; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4,
1976, 90 Stat. 1834; Pub. L. 96-364, title II, Sec. 204, Sept. 26, 1980,
94 Stat. 1287; Pub. L. 96-596, Sec. 2(a)(1)(J), (2)(H), Dec. 24, 1980,
94 Stat. 3469, 3471; Pub. L. 100-203, title IX, Secs. 9304(c)(1),
9305(a), Dec. 22, 1987, 101 Stat. 1330-348, 1330-351; Pub. L. 103-465,
title VII, Sec. 751(a)(9)(B), Dec. 8, 1994, 108 Stat. 5020; Pub. L. 104-
188, title I, Sec. 1464(a), Aug. 20, 1996, 110 Stat. 1824.)
References in Text
Section 3002(b) of title III of the Employee Retirement Income
Security Act of 1974, referred to in subsec. (g), is classified to
section 1202(b) of Title 29, Labor.
Amendments
1996--Subsec. (f)(4). Pub. L. 104-188 added par. (4).
1994--Subsec. (e)(1), (2)(A). Pub. L. 103-465, Sec. 751(a)(9)(B)(i),
substituted ``(a), (b), or (f)'' for ``(a) or (b)''.
Subsecs. (f), (g). Pub. L. 103-465, Sec. 751(a)(9)(B)(ii), added
subsec. (f) and redesignated former subsec. (f) as (g).
1987--Subsec. (a). Pub. L. 100-203, Sec. 9305(a)(2)(A), struck out
at end ``The tax imposed by this subsection shall be paid by the
employer responsible for contributing to or under the plan the amount
described in section 412(b)(3)(A).''
Pub. L. 100-203, Sec. 9304(c)(1), substituted ``10 percent (5
percent in the case of a multiemployer plan)'' for ``5 percent''.
Subsec. (b). Pub. L. 100-203, Sec. 9305(a)(2)(B), struck out at end
``The tax imposed by this subsection shall be paid by the employer
described in subsection (a).''
Subsecs. (e), (f). Pub. L. 100-203, Sec. 9305(a)(1), added subsec.
(e) and redesignated former subsec. (e) as (f).
1980--Subsec. (b). Pub. L. 96-596, Sec. 2(a)(1)(J), substituted
``taxable period'' for ``correction period''.
Subsec. (c)(1). Pub. L. 96-364, Sec. 204(1), substituted ``last two
sentences'' for ``last sentence''.
Subsec. (c)(3). Pub. L. 96-596, Sec. 2(a)(2)(H), substituted
provision defining taxable period as the period beginning with the end
of the plan year in which there is an accumulated funding deficiency and
ending on the earlier of the date of mailing of a notice of deficiency
with respect to the tax imposed by subsec. (a) of this section or the
date on which the tax imposed by subsec. (a) of this section is assessed
for provision defining correction period as the period beginning with
the end of a plan year in which there is an accumulated funding
deficiency and ending 90 days after the date of mailing of a notice of
deficiency under section 6212 of this title with respect to the tax
imposed by subsec. (b) of this section, extended by any period in which
a deficiency cannot be assessed under section 6213(a) of this title and
by any other period which the Secretary determines reasonable and
necessary to permit a reduction of the accumulated funding deficiency to
zero.
Subsec. (d). Pub. L. 96-364, Sec. 204(2), inserted provisions
relating to a multiemployer plan in reorganization.
1976--Subsecs. (c), (d). Pub. L. 94-455 struck out ``or his
delegate'' after ``Secretary'' wherever appearing.
Effective Date of 1996 Amendment
Section 1464(b) of Pub. L. 104-188 provided that: ``The amendment
made by this section [amending this section] shall take effect as if
included in the amendment made by clause (ii) of section 751(a)(9)(B) of
the Retirement Protection Act of 1994 [Pub. L. 103-465] (108 Stat.
5020).''
Effective Date of 1994 Amendment
Amendment by Pub. L. 103-465 applicable to plan years beginning
after Dec. 31, 1994, see section 751(b)(1) of Pub. L. 103-465, set out
as a note under section 401 of this title.
Effective Date of 1987 Amendment
Section 9304(c)(2) of Pub. L. 100-203 provided that: ``The
amendments made by this subsection [amending this section] shall apply
to plan years beginning after 1988.''
Amendment by section 9305(a) of Pub. L. 100-203 applicable with
respect to plan years beginning after December 31, 1987, see section
9305(d) of Pub. L. 100-203, set out as a note under section 412 of this
title.
Effective Date of 1980 Amendments
For effective date of amendment by Pub. L. 96-596 with respect to
any first tier tax and to any second tier tax, see section 2(d) of Pub.
L. 96-596, set out as an Effective Date note under section 4961 of this
title.
Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section
210(a) of Pub. L. 96-364, set out as an Effective Date note under
section 418 of this title.
Effective Date
Section applicable, except as otherwise provided in section 1017(c)
through (i) of Pub. L. 93-406, for plan years beginning after Sept. 2,
1974, and, in the case of plans in existence on Jan. 1, 1974, for plan
years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93-406,
set out as an Effective Date; Transitional Rules note under section 410
of this title.
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D
[Secs. 1401-1465] of title I of Pub. L. 104-188 require an amendment to
any plan or annuity contract, such amendment shall not be required to be
made before the first day of the first plan year beginning on or after
Jan. 1, 1998, see section 1465 of Pub. L. 104-188, set out as a note
under section 401 of this title.
Section Referred to in Other Sections
This section is referred to in sections 413, 4963, 6503 of this
title.
