26 U.S.C. § 4976 — Taxes with respect to funded welfare ben-

Page 3087 TITLE 26—INTERNAL REVENUE CODE § 4976 1986 shall not apply to a plan described in subpara- graph (A)(i). ‘‘(II) RESTRICTION LIFTED IF MODEL CERTIFIED.—If the Secretary of Labor determines under subpara- graph (B) or (D) that there is a computer model in- vestment advice program described in subparagraph (B), subclause (I) shall cease to apply as of the date of such determination. ‘‘(ii) CLASS EXEMPTION IF NO INITIAL CERTIFICATION BY SECRETARY.—If the Secretary of Labor determines under subparagraph (B) that there is no computer model investment advice program described in sub- paragraph (B), the Secretary of Labor shall grant a class exemption from treatment as a prohibited transaction under section 4975(c) of the Internal Rev- enue Code of 1986 to any transaction described in sec- tion 4975(d)(17)(A) of such Code with respect to plans described in subparagraph (A)(i), subject to such con- ditions as set forth in such exemption as are in the interests of the plan and its account beneficiary and protective of the rights of the account beneficiary and as are necessary to— ‘‘(I) ensure the requirements of sections 4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code of 1986 are met, and ‘‘(II) ensure the investment advice provided under the investment advice program utilizes prescribed objective criteria to provide asset allocation port- folios comprised of securities or other property available as investments under the plan. If the Secretary of Labor solicits any information under subparagraph (A) from a person and such per- son does not provide such information within 60 days after the solicitation, then, unless such failure was due to reasonable cause and not wilful neglect, such person shall not be entitled to utilize the class ex- emption under this clause. ‘‘(D) SUBSEQUENT DETERMINATION.— ‘‘(i) IN GENERAL.—If the Secretary of Labor initially makes a determination described in subparagraph (C)(ii), the Secretary may subsequently determine that there is a computer model investment advice program described in subparagraph (B). If the Sec- retary makes such subsequent determination, then the class exemption described in subparagraph (C)(ii) shall cease to apply after the later of— ‘‘(I) the date which is 2 years after such subse- quent determination, or ‘‘(II) the date which is 3 years after the first date on which such exemption took effect. ‘‘(ii) REQUESTS FOR DETERMINATION.—Any person may request the Secretary of Labor to make a deter- mination under this subparagraph with respect to any computer model investment advice program, and the Secretary of Labor shall make a determination with respect to such request within 90 days. If the Secretary of Labor makes a determination that such program is not described in subparagraph (B), the Secretary shall, within 10 days of such determina- tion, notify the Committee on Ways and Means and the Committee on Education and the Workforce of the House of Representatives and the Committee on Finance and the Committee on Health, Education, Labor, and Pensions of the Senate of such determina- tion and the reasons for such determination. ‘‘(E) EFFECTIVE DATE.—The provisions of this para- graph shall take effect on the date of the enactment of this Act [Aug. 17, 2006].’’ COORDINATION OF 2006 AMENDMENT WITH EXISTING EXEMPTIONS Pub. L. 109–280, title VI, § 601(c), Aug. 17, 2006, 120 Stat. 966, provided that: ‘‘Any exemption under section 408(b) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1108(b)] and section 4975(d) of the Internal Revenue Code of 1986 provided by the amend- ments made by this section [amending this section and section 1108 of Title 29, Labor] shall not in any manner alter existing individual or class exemptions, provided by statute or administrative action.’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998 For provisions directing that if any amendments made by subtitle D [§§ 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 begin- ning 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. 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 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. INTENT OF CONGRESS CONCERNING EMPLOYEE STOCK OWNERSHIP PLANS Pub. L. 94–455, title VIII, § 803(h), Oct. 4, 1976, 90 Stat. 1590, provided that: ‘‘The Congress, in a series of laws (the Regional Rail Reorganization Act of 1973, the Em- ployee Retirement Income Security Act of 1974, the Trade Act of 1974, and the Tax Reduction Act of 1975) and this Act has made clear its interest in encouraging employee stock ownership plans as a bold and innova- tive method of strengthening the free private enter- prise system which will solve the dual problems of se- curing capital funds for necessary capital growth and of bringing about stock ownership by all corporate em- ployees. The Congress is deeply concerned that the ob- jectives sought by this series of laws will be made unat- tainable by regulations and rulings which treat em- ployee stock ownership plans as conventional retire- ment plans, which reduce the freedom of the employee trusts and employers to take the necessary steps to im- plement the plans, and which otherwise block the es- tablishment and success of these plans. Because of the special purposes for which employee stock ownership plans are established, it is consistent with the intent of Congress to permit these plans (whether structured as pension, stock bonus, or profit-sharing plans) to dis- tribute income on employer securities currently.’’ § 4976. Taxes with respect to funded welfare ben- efit plans (a) General rule If— (1) an employer maintains a welfare benefit fund, and (2) there is a disqualified benefit provided during any taxable year, there is hereby imposed on such employer a tax equal to 100 percent of such disqualified benefit. (b) Disqualified benefit For purposes of subsection (a)— (1) In general The term ‘‘disqualified benefit’’ means— (A) any post-retirement medical benefit or life insurance benefit provided with respect to a key employee if a separate account is required to be established for such employee under section 419A(d) and such payment is not from such account, (B) any post-retirement medical benefit or life insurance benefit provided with respect to an individual in whose favor discrimina- tion is prohibited unless the plan meets the requirements of section 505(b) with respect Page 3088 TITLE 26—INTERNAL REVENUE CODE § 4977 to such benefit (whether or not such require- ments apply to such plan), and (C) any portion of a welfare benefit fund reverting to the benefit of the employer. (2) Exception for collective bargaining plans Paragraph (1)(B) shall not apply to any plan maintained pursuant to an agreement between employee representatives and 1 or more em- ployers if the Secretary finds that such agree- ment is a collective bargaining agreement and that the benefits referred to in paragraph (1)(B) were the subject of good faith bar- gaining between such employee representa- tives and such employer or employers. (3) Exception for nondeductible contributions Paragraph (1)(C) shall not apply to any amount attributable to a contribution to the fund which is not allowable as a deduction under section 419 for the taxable year or any prior taxable year (and such contribution shall not be included in any carryover under section 419(d)). (4) Exception for certain amounts charged against existing reserve Subparagraphs (A) and (B) of paragraph (1) shall not apply to post-retirement benefits charged against an existing reserve for post- retirement medical or life insurance benefits (as defined in section 512(a)(3)(E)) or charged against the income on such reserve. (c) Definitions For purposes of this section, the terms used in this section shall have the same respective meanings as when used in subpart D of part I of subchapter D of chapter 1. (Added Pub. L. 98–369, div. A, title V, § 511(c)(1), July 18, 1984, 98 Stat. 861; amended Pub. L. 99–514, title XVIII, § 1851(a)(11), Oct. 22, 1986, 100 Stat. 2861; Pub. L. 100–647, title I, § 1011B(a)(27)(A), (B), title III, § 3021(a)(1)(C), Nov. 10, 1988, 102 Stat. 3487, 3626; Pub. L. 101–140, title II, § 203(a)(2), Nov. 8, 1989, 103 Stat. 830.) Editorial Notes CODIFICATION Pub. L. 101–140 amended this section to read as if the amendments made by section 1011B(a)(27) of Pub. L. 100–647 (enacting subsec. (c)) had not been enacted. Sub- sequent to enactment by Pub. L. 100–647, subsec. (c) was amended by Pub. L. 100–647, § 3021(a)(1)(C). See 1988 Amendment note below. AMENDMENTS 1989—Subsec. (b)(5). Pub. L. 101–140 amended subsec. (b) to read as if amendments by Pub. L. 100–647, § 1011B(a)(27)(B), had not been enacted, see 1988 Amend- ment note below. Subsecs. (c), (d). Pub. L. 101–140 amended this section to read as if amendments by Pub. L. 100–647, § 1011B(a)(27)(A), had not been enacted, see 1988 Amend- ment note below. 1988—Subsec. (b)(5). Pub. L. 100–647, § 1011B(a)(27)(B), added par. (5) relating to limitation in case of benefits to which section 89 applies. Subsec. (c). Pub. L. 100–647, § 1011B(a)(27)(A), added subsec. (c) relating to tax on funded welfare benefit funds which include discriminatory employee benefit plan. Former subsec. (c) redesignated (d). Subsec. (c)(1)(B). Pub. L. 100–647, § 3021(a)(1)(C)(i), sub- stituted ‘‘any testing year (as defined in section 89(j)(13))’’ for ‘‘any plan year’’, see Codification note above. Subsec. (c)(2)(A). Pub. L. 100–647, § 3021(a)(1)(C)(ii), substituted ‘‘testing’’ for ‘‘plan’’ in cls. (i) and (ii), see Codification note above. Subsec. (d). Pub. L. 100–647, § 1011B(a)(27)(A), redesig- nated former subsec. (c) as (d). 1986—Subsec. (b). Pub. L. 99–514 amended subsec. (b) generally. Prior to amendment, subsec. (b) read as fol- lows: ‘‘For purposes of subsection (a), the term ‘dis- qualified benefit’ means— ‘‘(1) any medical benefit or life insurance benefit provided with respect to a key employee other than from a separate account established for such owner under section 419A(d), and ‘‘(2) any post-retirement medical or life insurance benefit unless the plan meets the requirements of section 505(b)(1) with respect to such benefit, and ‘‘(3) any portion of such fund reverting to the ben- efit of the employer.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–140 effective as if included in section 1151 of Pub. L. 99–514, see section 203(c) of Pub. L. 101–140, set out as a note under section 79 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by section 1011B(a)(27)(A), (B) of Pub. L. 100–647 effective, except as otherwise provided, as if in- cluded in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Amendment by section 3021(a)(1)(C) of Pub. L. 100–647 effective as if included in the amendments by section 1151 of Pub. L. 99–514, see section 3021(d)(1) of Pub. L. 100–647, set out as a note under section 129 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title. EFFECTIVE DATE Section applicable to benefits provided after Dec. 31, 1985, see section 511(e)(7) of Pub. L. 98–369, set out as a note under section 419 of this title. 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 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. § 4977. Tax on certain fringe benefits provided by an employer (a) Imposition of tax In the case of an employer to whom an elec- tion under this section applies for any calendar year, there is hereby imposed a tax for such cal- endar year equal to 30 percent of the excess fringe benefits. (b) Excess fringe benefits For purposes of subsection (a), the term ‘‘ex- cess fringe benefits’’ means, with respect to any calendar year—