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26 U.S.C. § 4978 — Tax on certain dispositions by employee stock ownership plans and certain cooperatives
Federal law — U.S. Code and appendices · legal_authorities
**(a) Tax on dispositions of securities to which section 1042 applies before close of minimum holding period** If, during the 3-year period after the date on which the employee stock ownership plan or eligible worker-owned cooperative acquired any qualified securities in a sale to which section 1042 applied or acquired any qualified employer securities in a qualified gratuitous transfer to which section 664(g) applied, such plan or cooperative disposes of any qualified securities and—
(1) the total number of shares held by such plan or cooperative after such disposition is less than the total number of employer securities held immediately after such sale, or
(2) except to the extent provided in regulations, the value of qualified securities held by such plan or cooperative after such disposition is less than 30 percent of the total value of all employer securities as of such disposition (60 percent of the total value of all employer securities as of such disposition in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied),
there is hereby imposed a tax on the disposition equal to the amount determined under subsection (b).
**(b) Amount of tax**
(1) **In general** — The amount of the tax imposed by subsection (a) shall be equal to 10 percent of the amount realized on the disposition.
(2) **Limitation** — The amount realized taken into account under paragraph (1) shall not exceed that portion allocable to qualified securities acquired in the sale to which section 1042 applied or acquired in the qualified gratuitous transfer to which section 664(g) applied determined as if such securities were disposed of—
(A) first from qualified securities to which section 1042 applied or to which section 664(g)
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Source file: Laws/federal/codes/united-states-code/title-26/section-4978-tax-on-certain-dispositions-by-employee-stock-ownership-plans-and-certai--ee712042b7.md
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Source location: Title 26, Chapter 43, § 4978; chapter-043-qualified-pension-etc-plans.md
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**(a) Tax on dispositions of securities to which section 1042 applies before close of minimum holding period** If, during the 3-year period after the date on which the employee stock ownership plan or eligible worker-owned cooperative acquired any qualified securities in a sale to which section 1042 applied or acquired any qualified employer securities in a qualified gratuitous transfer to which section 664(g) applied, such plan or cooperative disposes of any qualified securities and—
(1) the total number of shares held by such plan or cooperative after such disposition is less than the total number of employer securities held immediately after such sale, or
(2) except to the extent provided in regulations, the value of qualified securities held by such plan or cooperative after such disposition is less than 30 percent of the total value of all employer securities as of such disposition (60 percent of the total value of all employer securities as of such disposition in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied),
there is hereby imposed a tax on the disposition equal to the amount determined under subsection (b).
**(b) Amount of tax**
(1) **In general** — The amount of the tax imposed by subsection (a) shall be equal to 10 percent of the amount realized on the disposition.
(2) **Limitation** — The amount realized taken into account under paragraph (1) shall not exceed that portion allocable to qualified securities acquired in the sale to which section 1042 applied or acquired in the qualified gratuitous transfer to which section 664(g) applied determined as if such securities were disposed of—
(A) first from qualified securities to which section 1042 applied or to which section 664(g) applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and
(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence.
(3) **Distributions to employees** — The amount realized on any distribution to an employee for less than fair market value shall be determined as if the qualified security had been sold to the employee at fair market value.
**(c) Liability for payment of taxes** The tax imposed by this subsection shall be paid by—
(1) the employer, or
(2) the eligible worker-owned cooperative,
that made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3) (as the case may be).
**(d) Section not to apply to certain dispositions**
(1) **Certain distributions to employees** — This section shall not apply with respect to any distribution of qualified securities (or sale of such securities) which is made by reason of—
(A) the death of the employee,
(B) the retirement of the employee after the employee has attained 59½ years of age,
(C) the disability of the employee (within the meaning of section 72(m)(7)), or
(D) the separation of the employee from service for any period which results in a 1-year break in service (within the meaning of section 411(a)(6)(A)).
(2) **Certain reorganizations** — In the case of any exchange of qualified securities in any reorganization described in section 368(a)(1) for stock of another corporation, such exchange shall not be treated as a disposition for purposes of this section.
(3) **Liquidation of corporation into cooperative** — In the case of any exchange of qualified securities pursuant to the liquidation of the corporation issuing qualified securities into the eligible worker-owned cooperative in a transaction which meets the requirements of section 332 (determined by substituting “100 percent” for “80 percent” each place it appears in section 332(b)(1)), such exchange shall not be treated as a disposition for purposes of this section.
(4) **Dispositions to meet diversification requirements** — This section shall not apply to any disposition of qualified securities which is required under section 401(a)(28).
**(e) Definitions and special rules** For purposes of this section—
(1) **Employee stock ownership plan** — The term “employee stock ownership plan” has the meaning given to such term by section 4975(e)(7).
(2) **Qualified securities** — The term “qualified securities” has the meaning given to such term by section 1042(c)(1); except that such section shall be applied without regard to subparagraph (B) thereof for purposes of applying this section and section 4979A with respect to securities acquired in a qualified gratuitous transfer (as defined in section 664(g)(1)).
(3) **Eligible worker-owned cooperative** — The term “eligible worker-owned cooperative” has the meaning given to such term by section 1042(c)(2).
(4) **Disposition** — The term “disposition” includes any distribution.
(5) **Employer securities** — The term “employer securities” has the meaning given to such term by section 409(l).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Energy credit**
(1) **In general** — For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) **Energy percentage**
(A) *In general* — Except as provided in paragraphs (6) and (7), the energy percentage is—
(i) 6 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.
(B) *Coordination with rehabilitation credit* — The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(C) *Nonapplication of increases to energy percentage* — For purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.
(3) **Energy property** — For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to he
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Tax credit employee stock ownership plan defined** Except as otherwise provided in this title, for purposes of this title, the term “tax credit employee stock ownership plan” means a defined contribution plan which—
(1) meets the requirements of section 401(a),
(2) is designed to invest primarily in employer securities, and
(3) meets the requirements of subsections (b), (c), (d), (e), (f), (g), (h), and (o) of this section.
**(b) Required allocation of employer securities**
(1) **In general** — A plan meets the requirements of this subsection if—
(A) the plan provides for the allocation for the plan year of all employer securities transferred to it or purchased by it (because of the requirements of section 41(c)(1)(B)) 11 See References in Text note below. to the accounts of all participants who are entitled to share in such allocation, and
(B) for the plan year the allocation to each participant so entitled is an amount which bears substantially the same proportion to the amount of all such securities allocated to all such participants in the plan for that year as the amount of compensation paid to such participant during that year bears to the compensation paid to all such participants during that year.
(2) **Compensation in excess of $100,000 disregarded** — For purposes of paragraph (1), compensation of any participant in excess of the first $100,000 per year shall be disregarded.
(3) **Determination of compensation** — For purposes of this subsection, the amount of compensation paid to a participant for any period is the amount of such participant’s compensation (within the meaning of section 415(c)(3)) for such period.
(4) **Suspension of allocation in certain cases** — Notwithstanding paragraph (1), the allocation to the account of any partici
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Requirements for qualification** A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
(2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination));
(3) if the plan of which such trust is a part satisfies the requireme
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Federal law — U.S. Code and appendices · legal_authorities
### Statutory Notes
Section, added Pub. L. 98–369, div. A, title V, § 543(a), July 18, 1984, 98 Stat. 891; amended Pub. L. 99–514, title XI, § 1173(b)(1)(A), (2), title XVIII, § 1854(c)(2)(A), (C), (D), Oct. 22, 1986, 100 Stat. 2515, 2879; Pub. L. 100–647, title I, § 1011B(h)(1), (2), Nov. 10, 1988, 102 Stat. 3490; Pub. L. 101–239, title VII, § 7301(a)–(c), Dec. 19, 1989, 103 Stat. 2346, 2347, prior to repeal, read as follows:
§ 133. Interest on certain loans used to acquire employer securities
(a) In general
Gross income does not include 50 percent of the interest received by—
(1) a bank (within the meaning of section 581),
(2) an insurance company to which subchapter L applies,
(3) a corporation actively engaged in the business of lending money, or
(4) a regulated investment company (as defined in section 851),
with respect to a securities acquisition loan.
(b) Securities acquisition loan
(1) In general
For purposes of this section, the term “securities acquisition loan” means—
(A) any loan to a corporation or to an employee stock ownership plan to the extent that the proceeds are used to acquire employer securities for the plan, or
(B) any loan to a corporation to the extent that, within 30 days, employer securities are transferred to the plan in an amount equal to the proceeds of such loan and such securities are allocable to accounts of plan participants within 1 year of the date of such loan.
For purposes of this paragraph, the term “employer securities” has the meaning given such term by section 409(l). The term “securities acquisition loan” shall not include a loan with a term greater than 15 years.
(2) Loans between related persons
The term “securities acquisition loan” shall not include—
(A) any loan made between corporations which are member
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 133
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Federal law — U.S. Code and appendices · legal_authorities
Page 3089
TITLE 26—INTERNAL REVENUE CODE
§ 4978
(1) the aggregate value of the fringe benefits
provided by the employer during the calendar
year which were not includible in gross in-
come under paragraphs (1) and (2) of section
132(a), over
(2) 1 percent of the aggregate amount of
compensation—
(A) which was paid by the employer during
such calendar year to employees, and
(B) was includible in gross income for pur-
poses of chapter 1.
(c) Effect of election on section 132(a)
If—
(1) an election under this section is in effect
with respect to an employer for any calendar
year, and
(2) at all times on or after January 1, 1984,
and before the close of the calendar year in-
volved, substantially all of the employees of
the employer were entitled to employee dis-
counts on goods or services provided by the
employer in 1 line of business,
for purposes of paragraphs (1) and (2) of section
132(a) (but not for purposes of section 132(h)), all
employees of any line of business of the em-
ployer which was in existence on January 1,
1984, shall be treated as employees of the line of
business referred to in paragraph (2).
(d) Period of election
An election under this section shall apply to
the calendar year for which made and all subse-
quent calendar years unless revoked by the em-
ployer.
(e) Treatment of controlled groups
All employees treated as employed by a single
employer under subsection (b), (c), or (m) of sec-
tion 414 shall be treated as employed by a single
employer for purposes of this section.
(f) Section to apply only to employment within
the United States
Except as otherwise provided in regulations,
this section shall apply only with respect to em-
ployment within the United States.
(Added Pub. L. 98–369, div. A, title V, § 531(e)(1),
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 4978
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