§ 4979A. — Tax on certain prohibited allocations of qualified securities.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 26USC4979A]
TITLE 26--INTERNAL REVENUE CODE
Subtitle D--Miscellaneous Excise Taxes
CHAPTER 43--QUALIFIED PENSION, ETC., PLANS
Sec. 4979A. Tax on certain prohibited allocations of qualified
securities
(a) Imposition of tax
If--
(1) there is a prohibited allocation of qualified securities by
any employee stock ownership plan or eligible worker-owned
cooperative,
(2) there is an allocation described in section 664(g)(5)(A),
(3) there is any allocation of employer securities which
violates the provisions of section 409(p), or a nonallocation year
described in subsection (e)(2)(C) with respect to an employee stock
ownership plan, or
(4) any synthetic equity is owned by a disqualified person in
any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal to
50 percent of the amount involved.
(b) Prohibited allocation
For purposes of this section, the term ``prohibited allocation''
means--
(1) any allocation of qualified securities acquired in a sale to
which section 1042 applies which violates the provisions of section
409(n), and
(2) any benefit which accrues to any person in violation of the
provisions of section 409(n).
(c) Liability for tax
The tax imposed by this section shall be paid--
(1) in the case of an allocation referred to in paragraph (1) or
(2) of subsection (a), by--
(A) the employer sponsoring such plan, or
(B) the eligible worker-owned cooperative,
which made the written statement described in section 664(g)(1)(E)
or in section 1042(b)(3)(B) (as the case may be), and
(2) in the case of an allocation or ownership referred to in
paragraph (3) or (4) of subsection (a), by the S corporation the
stock in which was so allocated or owned.
(d) Special statute of limitations for tax attributable to certain
allocations
The statutory period for the assessment of any tax imposed by this
section on an allocation described in subsection (a)(2) of qualified
employer securities shall not expire before the date which is 3 years
from the later of--
(1) the 1st allocation of such securities in connection with a
qualified gratuitous transfer (as defined in section 664(g)(1)), or
(2) the date on which the Secretary is notified of the
allocation described in subsection (a)(2).
(e) Definitions and special rules
For purposes of this section--
(1) Definitions
Except as provided in paragraph (2), terms used in this section
have the same respective meanings as when used in sections 409 and
4978.
(2) Special rules relating to tax imposed by reason of
paragraph (3) or (4) of subsection (a)
(A) Prohibited allocations
The amount involved with respect to any tax imposed by
reason of subsection (a)(3) is the amount allocated to the
account of any person in violation of section 409(p)(1).
(B) Synthetic equity
The amount involved with respect to any tax imposed by
reason of subsection (a)(4) is the value of the shares on which
the synthetic equity is based.
(C) Special rule during first nonallocation year
For purposes of subparagraph (A), the amount involved for
the first nonallocation year of any employee stock ownership
plan shall be determined by taking into account the total value
of all the deemed-owned shares of all disqualified persons with
respect to such plan.
(D) Statute of limitations
The statutory period for the assessment of any tax imposed
by this section by reason of paragraph (3) or (4) of subsection
(a) shall not expire before the date which is 3 years from the
later of--
(i) the allocation or ownership referred to in such
paragraph giving rise to such tax, or
(ii) the date on which the Secretary is notified of such
allocation or ownership.
(Added and amended Pub. L. 99-514, title XI, Sec. 1172(b)(2), title
XVIII, Sec. 1854(a)(9)(A), Oct. 22, 1986, 100 Stat. 2514, 2877; Pub. L.
101-239, title VII, Sec. 7304(a)(2)(D), Dec. 19, 1989, 103 Stat. 2353;
Pub. L. 104-188, title I, Sec. 1704(t)(22), Aug. 20, 1996, 110 Stat.
1888; Pub. L. 105-34, title XV, Sec. 1530(c)(15)-(17), Aug. 5, 1997, 111
Stat. 1079, 1080; Pub. L. 107-16, title VI, Sec. 656(c), June 7, 2001,
115 Stat. 134.)
Amendment of Section
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
Amendments
2001--Subsec. (a). Pub. L. 107-16, Secs. 656(c)(1), 901, temporarily
added pars. (3) and (4) and, in concluding provisions, substituted
``there is hereby imposed a tax on such allocation or ownership equal to
50 percent of the amount involved.'' for ``there is hereby imposed a tax
on such allocation equal to 50 percent of the amount involved.'' See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c). Pub. L. 107-16, Secs. 656(c)(2), 901, temporarily
amended heading and text of subsec. (c) generally. Prior to amendment,
text read as follows: ``The tax imposed by this section shall be paid
by--
``(1) the employer sponsoring such plan, or
``(2) the eligible worker-owned cooperative,
which made the written statement described in section 664(g)(1)(E) or in
section 1042(b)(3)(B) (as the case may be).''
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (e). Pub. L. 107-16, Secs. 656(c)(3), 901, temporarily
amended heading and text of subsec. (e) generally. Prior to amendment,
text read as follows: ``Terms used in this section have the same
respective meaning as when used in section 4978.'' See Effective and
Termination Dates of 2001 Amendment note below.
1997--Subsec. (a). Pub. L. 105-34, Sec. 1530(c)(15), amended heading
and text of subsec. (a) generally. Prior to amendment, text read as
follows: ``If there is a prohibited allocation of qualified securities
by any employee stock ownership plan or eligible worker-owned
cooperative, there is hereby imposed a tax on such allocation equal to
50 percent of the amount involved.''
Subsec. (c). Pub. L. 105-34, Sec. 1530(c)(16), amended heading and
text of subsec. (c) generally. Prior to amendment, text read as follows:
``The tax imposed by this section shall be paid by--
``(1) the employer sponsoring such plan, or
``(2) the eligible worker-owned cooperative,
which made the written statement described in section 1042(b)(3)(B).''
Subsecs. (d), (e). Pub. L. 105-34, Sec. 1530(c)(17), added subsec.
(d) and redesignated former subsec. (d) as (e).
1996--Subsec. (c). Pub. L. 104-188 amended directory language of
Pub. L. 101-239, Sec. 7304(a)(2)(D)(ii). See 1989 Amendment note below.
1989--Subsec. (b)(1). Pub. L. 101-239, Sec. 7304(a)(2)(D)(i), struck
out ``or section 2057'' after ``section 1042''.
Subsec. (c). Pub. L. 101-239, Sec. 7304(a)(2)(D)(ii), as amended by
Pub. L. 104-188, struck out ``or section 2057(d)'' after ``section
1042(b)(3)(B)'' in concluding provisions.
1986--Subsec. (b)(1). Pub. L. 99-514, Sec. 1172(b)(2)(A), inserted
reference to section 2057.
Subsec. (c). Pub. L. 99-514, Sec. 1172(b)(2)(B), inserted reference
to section 2057(d).
Effective and Termination Dates of 2001 Amendment
Amendment by Pub. L. 107-16 applicable to plan years beginning after
Dec. 31, 2004, except that in the case of any employee stock ownership
plan established after Mar. 14, 2001, or 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
this title is not in effect on such date, amendment applicable to plan
years ending after Mar. 14, 2001, see section 656(d) of Pub. L. 107-16,
set out as a note under section 409 of this title.
Amendment by Pub. L. 107-16 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 Pub. L. 107-16, set
out as a note under section 1 of this title.
Effective Date of 1997 Amendment
Amendment by Pub. L. 105-34 applicable to transfers made by trusts
to, or for the use of, an employee stock ownership plan after Aug. 5,
1997, see section 1530(d) of Pub. L. 105-34, set out as a note under
section 401 of this title.
Effective Date of 1989 Amendment
Amendment by Pub. L. 101-239 applicable to estates of decedents
dying after Dec. 19, 1989, see section 7304(a)(3) of Pub. L. 101-239,
set out as a note under section 409 of this title.
Effective Date of 1986 Amendment
Amendment by section 1172(b)(2) of Pub. L. 99-514 applicable to
sales after Oct. 22, 1986, with respect to which election is made by
executor of an estate who is required to file the return of the tax
imposed by this title on a date (including extensions) after Oct. 22,
1986, see section 1172(c) of Pub. L. 99-514, set out as a note under
section 409 of this title.
Effective Date
Section 1854(a)(9)(D) of Pub. L. 99-514 provided that: ``The
amendments made by this paragraph [enacting this section and amending
section 1042 of this title] shall apply to sales of securities after the
date of the enactment of this Act [Oct. 22, 1986].''
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 [Secs. 1101-1147 and 1171-1177] or title XVIII
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan,
such plan amendment shall not be required to be made before the first
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub.
L. 99-514, as amended, set out as a note under section 401 of this
title.
Section Referred to in Other Sections
This section is referred to in sections 409, 664, 1042, 4978 of this
title.
