26 U.S.C. § 195 — Start-up expenditures

Page 920 TITLE 26—INTERNAL REVENUE CODE § 194A EFFECTIVE DATE OF 1982 AMENDMENT Amendment by Pub. L. 97–354 applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as an Effective Date note under section 1361 of this title. EFFECTIVE DATE Pub. L. 96–451, title III, § 301(d), Oct. 14, 1980, 94 Stat. 1991, provided that: ‘‘The amendments made by this section [enacting this section and amending sections 62 and 1245 of this title] shall apply with respect to addi- tions to capital account made after December 31, 1979.’’ § 194A. Contributions to employer liability trusts (a) Allowance of deduction There shall be allowed as a deduction for the taxable year an amount equal to the amount— (1) which is contributed by an employer to a trust described in section 501(c)(22) (relating to withdrawal liability payment fund) which meets the requirements of section 4223(h) of the Employee Retirement Income Security Act of 1974, and (2) which is properly allocable to such tax- able year. (b) Allocation to taxable year In the case of a contribution described in sub- section (a) which relates to any specified period of time which includes more than one taxable year, the amount properly allocable to any tax- able year in such period shall be determined by prorating such amounts to such taxable years under regulations prescribed by the Secretary. (c) Disallowance of deduction No deduction shall be allowed under sub- section (a) with respect to any contribution de- scribed in subsection (a) which does not relate to any specified period of time. (Added Pub. L. 96–364, title II, § 209(c)(1), Sept. 26, 1980, 94 Stat. 1290, § 194; renumbered § 194A, Pub. L. 97–448, title III, § 305(b)(1), Jan. 12, 1983, 96 Stat. 2399.) Editorial Notes REFERENCES IN TEXT Section 4223(h) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (a), is classi- fied to section 1403(h) of Title 29, Labor. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1983 AMENDMENT Pub. L. 97–448, title III, § 311(c)(2), Jan. 12, 1983, 96 Stat. 2411, provided that: ‘‘The amendments made by subsection (b) of section 305 [redesignating section 194 of this title, relating to contributions to employer li- ability trusts, as this section] shall take effect on Octo- ber 14, 1980.’’ EFFECTIVE DATE Pub. L. 96–364, title II, § 210, Sept. 26, 1980, 94 Stat. 1291, provided that: ‘‘(a) Except as otherwise provided in this section, the amendments made by this title [amending sections 401, 404, 411 to 414, 4971, and 4975 of this title] shall take ef- fect on the date of the enactment of this Act [Sept. 26, 1980]. ‘‘(b) Subpart C of part I of subchapter D of chapter 1 of such Code (as added by this Act) [sections 418 to 418E of this title] shall take effect, with respect to each plan, on the first day of the first plan year beginning on or after the earlier of— ‘‘(1) the date on which the last collective-bar- gaining agreement providing for employer contribu- tions under the plan, which was in effect on the date of the enactment of this Act [Sept. 26, 1980], expires, without regard to extensions agreed to after such date of enactment, or ‘‘(2) 3 years after the date of the enactment of this Act [Sept. 26, 1980]. ‘‘(c) The amendments made by section 209 [enacting this section and amending sections 501 and 4975 of this title] shall apply to taxable years ending after the date of the enactment of this Act [Sept. 26, 1980].’’ § 195. Start-up expenditures (a) Capitalization of expenditures Except as otherwise provided in this section, no deduction shall be allowed for start-up ex- penditures. (b) Election to deduct (1) Allowance of deduction If a taxpayer elects the application of this subsection with respect to any start-up ex- penditures— (A) the taxpayer shall be allowed a deduc- tion for the taxable year in which the active trade or business begins in an amount equal to the lesser of— (i) the amount of start-up expenditures with respect to the active trade or busi- ness, or (ii) $5,000, reduced (but not below zero) by the amount by which such start-up ex- penditures exceed $50,000, and (B) the remainder of such start-up expendi- tures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the active trade or busi- ness begins. (2) Dispositions before close of amortization period In any case in which a trade or business is completely disposed of by the taxpayer before the end of the period to which paragraph (1) applies, any deferred expenses attributable to such trade or business which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under sec- tion 165. (3) Special rule for taxable years beginning in 2010 In the case of a taxable year beginning in 2010, paragraph (1)(A)(ii) shall be applied— (A) by substituting ‘‘$10,000’’ for ‘‘$5,000’’, and (B) by substituting ‘‘$60,000’’ for ‘‘$50,000’’. (c) Definitions For purposes of this section— (1) Start-up expenditures The term ‘‘start-up expenditure’’ means any amount— (A) paid or incurred in connection with— (i) investigating the creation or acquisi- tion of an active trade or business, or (ii) creating an active trade or business, or (iii) any activity engaged in for profit and for the production of income before Page 921 TITLE 26—INTERNAL REVENUE CODE § 196 1 See References in Text note below. the day on which the active trade or busi- ness begins, in anticipation of such activ- ity becoming an active trade or business, and (B) which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred. The term ‘‘start-up expenditure’’ does not in- clude any amount with respect to which a de- duction is allowable under section 163(a), 164, or 174. (2) Beginning of trade or business (A) In general Except as provided in subparagraph (B), the determination of when an active trade or business begins shall be made in accordance with such regulations as the Secretary may prescribe. (B) Acquired trade or business An acquired active trade or business shall be treated as beginning when the taxpayer acquires it. (d) Election (1) Time for making election An election under subsection (b) shall be made not later than the time prescribed by law for filing the return for the taxable year in which the trade or business begins (includ- ing extensions thereof). (2) Scope of election The period selected under subsection (b) shall be adhered to in computing taxable in- come for the taxable year for which the elec- tion is made and all subsequent taxable years. (Added Pub. L. 96–605, title I, § 102(a), Dec. 28, 1980, 94 Stat. 3522; amended Pub. L. 98–369, div. A, title I, § 94(a), July 18, 1984, 98 Stat. 614; Pub. L. 108–357, title VIII, § 902(a), Oct. 22, 2004, 118 Stat. 1651; Pub. L. 111–240, title II, § 2031(a), Sept. 27, 2010, 124 Stat. 2559.) Editorial Notes AMENDMENTS 2010—Subsec. (b)(3). Pub. L. 111–240 added par. (3). 2004—Subsec. (b). Pub. L. 108–357, § 902(a)(2), sub- stituted ‘‘deduct’’ for ‘‘amortize’’ in heading. Subsec. (b)(1). Pub. L. 108–357, § 902(a)(1), amended heading and text of par. (1) generally. Prior to amend- ment, text read as follows: ‘‘Start-up expenditures may, at the election of the taxpayer, be treated as de- ferred expenses. Such deferred expenses shall be al- lowed as a deduction prorated equally over such period of not less than 60 months as may be selected by the taxpayer (beginning with the month in which the ac- tive trade or business begins).’’ 1984—Subsec. (a). Pub. L. 98–369 amended subsec. (a) generally, substituting provisions dealing with capital- ization of expenditures for provisions dealing with elec- tion to amortize. Subsec. (b). Pub. L. 98–369 amended subsec. (b) gen- erally, substituting provisions dealing with election to amortize for provisions dealing with start-up expendi- tures. Subsec. (c). Pub. L. 98–369 amended subsec. (c) gen- erally, substituting provisions setting forth definitions for provisions dealing with election. Subsec. (d). Pub. L. 98–369 amended subsec. (d) gen- erally, substituting provisions dealing with election for provisions dealing with business beginning. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–240, title II, § 2031(b), Sept. 27, 2010, 124 Stat. 2559, provided that: ‘‘The amendment made by this section [amending this section] shall apply to amounts paid or incurred in taxable years beginning after December 31, 2009.’’ EFFECTIVE DATE OF 2004 AMENDMENT Pub. L. 108–357, title VIII, § 902(d), Oct. 22, 2004, 118 Stat. 1652, provided that: ‘‘The amendments made by this section [amending this section and sections 248 and 709 of this title] shall apply to amounts paid or in- curred after the date of the enactment of this Act [Oct. 22, 2004].’’ EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title I, § 94(c), July 18, 1984, 98 Stat. 615, provided that: ‘‘The amendments made by this section [amending this section] shall apply to tax- able years beginning after June 30, 1984.’’ EFFECTIVE DATE Pub. L. 96–605, title I, § 102(c), Dec. 28, 1980, 94 Stat. 3522, provided that: ‘‘The amendments made by this section [enacting this section] shall apply to amounts paid or incurred after July 29, 1980, in taxable years ending after such date.’’ § 196. Deduction for certain unused business credits (a) Allowance of deduction If any portion of the qualified business credits determined for any taxable year has not, after the application of section 38(c), been allowed to the taxpayer as a credit under section 38 for any taxable year, an amount equal to the credit not so allowed shall be allowed to the taxpayer as a deduction for the first taxable year following the last taxable year for which such credit could, under section 39, have been allowed as a credit. (b) Taxpayer’s dying or ceasing to exist If a taxpayer dies or ceases to exist before the first taxable year following the last taxable year for which the qualified business credits could, under section 39, have been allowed as a credit, the amount described in subsection (a) (or the proper portion thereof) shall, under regulations prescribed by the Secretary, be allowed to the taxpayer as a deduction for the taxable year in which such death or cessation occurs. (c) Qualified business credits For purposes of this section, the term ‘‘quali- fied business credits’’ means— (1) the investment credit determined under section 46 (but only to the extent attributable to property the basis of which is reduced by section 50(c)), (2) the work opportunity credit determined under section 51(a), (3) the alcohol fuels credit determined under section 40(a), (4) the research credit determined under sec- tion 41(a) (other than such credit determined under section 280C(c)(3)) 1 for taxable years be- ginning after December 31, 1988,