26 U.S.C. § 162 — Trade or business expenses

Page 725 TITLE 26—INTERNAL REVENUE CODE § 162 1992—Pub. L. 102–486, title XIX, § 1913(a)(3)(B), Oct. 24, 1992, 106 Stat. 3019, added item 179A. 1990—Pub. L. 101–508, title XI, § 11801(b)(3), Nov. 5, 1990, 104 Stat. 1388–522, struck out item 184 ‘‘Amortiza- tion of certain railroad rolling stock’’ and item 188 ‘‘Amortization of certain expenditures for child care fa- cilities’’. 1986—Pub. L. 99–514, title II, §§ 201(d)(2)(B), 241(b)(3), 242(b)(3), title IV, § 402(b)(3), title VIII, § 803(c)(2), Oct. 22, 1986, 100 Stat. 2139, 2181, 2221, 2356, substituted ‘‘Am- ortization of cost of acquiring a lease’’ for ‘‘Deprecia- tion or amortization of improvements made by lessee on lessor’s property’’ in item 178, and struck out items 177 ‘‘Trademark and trade name expenditures’’, 182 ‘‘Expenditures by farmers for clearing land’’, 185 ‘‘Am- ortization of railroad grading and tunnel bores’’, and 189 ‘‘Amortization of real property construction period interest and taxes’’. 1984—Pub. L. 98–369, div. A, title I, § 94(b), title IV, § 474(r)(8)(B), July 18, 1984, 98 Stat. 615, 841, reenacted item 195 without change, and substituted ‘‘business credits’’ for ‘‘investment credits’’ in item 196. 1983—Pub. L. 97–448, title III, § 305(b)(2), Jan. 12, 1983, 96 Stat. 2399, redesignated item 194 (relating to con- tributions to employer liability trusts) as 194A. 1982—Pub. L. 97–248, title II, § 205(a)(5)(C), Sept. 3, 1982, 96 Stat. 430, added item 196. 1981—Pub. L. 97–34, title II, §§ 201(d), 202(d)(3), Aug. 13, 1981, 95 Stat. 219, 221, added item 168 and substituted ‘‘Election to expense certain depreciable business as- sets’’ for ‘‘Additional first-year depreciation allowance for small business’’ in item 179. 1980—Pub. L. 96–605, title I, § 102(b), Dec. 28, 1980, 94 Stat. 3522, added item 195. Pub. L. 96–451, title III, § 301(c)(2), Oct. 14, 1980, 94 Stat. 1991, added item 194 relating to amortization of reforestation expenditures. Pub. L. 96–364, title II, § 209(c)(2), Sept. 26, 1980, 94 Stat. 1291, added item 194 relating to contributions to employer liability trusts. Pub. L. 96–223, title II, § 251(a)(2)(A), Apr. 2, 1980, 94 Stat. 287, added item 193. 1978—Pub. L. 95–227, § 4(b)(2), Feb. 10, 1978, 95 Stat. 17, added item 192. 1977—Pub. L. 95–30, title IV, § 402(a)(4), May 23, 1977, 91 Stat. 155, struck out ‘‘on-the-job training and’’ after ‘‘certain expenditures for’’ in item 188. 1976—Pub. L. 94–455, title II, § 201(b), title XIX, §§ 1901(b)(11)(B), 1951(c)(2)(D), title XXI, §§ 2122(b)(1), 2124(a)(3)(A), Oct. 4, 1976, 90 Stat. 1527, 1795, 1841, 1915, 1917, struck out item 168 ‘‘Amortization of emergency facilities’’ and item 187 ‘‘Amortization of certain coal mine safety equipment’’ and added items 189, 190, and 191. 1971—Pub. L. 92–178, title III, § 303(c)(6), Dec. 10, 1971, 85 Stat. 522, added item 188. 1969—Pub. L. 91–172, title II, § 213(c)(1), title VII, §§ 704(b)(1), 705(b), 707(b), title IX, § 904(b), Dec. 30, 1969, 83 Stat. 572, 669, 674, 675, 712, substituted reference to pollution control facilities for reference to grain stor- age facilities in item 169, and added items 183 to 187. 1964—Pub. L. 88–272, title II, § 203(a)(3)(D). Feb. 26, 1964, 78 Stat. 34, struck out item 181 ‘‘Deduction for cer- tain unused investment credit’’. 1962—Pub. L. 87–834, §§ 2(g)(3), 21(c), Oct. 16, 1962, 76 Stat. 973, 1064, added items 181, 182. 1960—Pub. L. 86–779, § 6(b), Sept. 14, 1960, 74 Stat. 1001, added item 180. 1958—Pub. L. 85–866, title I, § 15(b), title II, § 204(b), Sept. 2, 1958, 72 Stat. 1613, 1680, added items 178 and 179. 1956—Act June 29, 1956, ch. 464, § 4(b), 70 Stat. 406, added item 177. 1954—Act Sept. 1, 1954, ch. 1206, title II, § 210(b), 68 Stat. 1097, added item 176. § 161. Allowance of deductions In computing taxable income under section 63, there shall be allowed as deductions the items specified in this part, subject to the exceptions provided in part IX (sec. 261 and following, relat- ing to items not deductible). (Aug. 16, 1954, ch. 736, 68A Stat. 45; Pub. L. 95–30, title I, § 102(b)(1), May 23, 1977, 91 Stat. 137.) Editorial Notes AMENDMENTS 1977—Pub. L. 95–30 substituted ‘‘section 63’’ for ‘‘sec- tion 63(a)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1977 AMENDMENT Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title. § 162. Trade or business expenses (a) In general There shall be allowed as a deduction all the ordinary and necessary expenses paid or in- curred during the taxable year in carrying on any trade or business, including— (1) a reasonable allowance for salaries or other compensation for personal services actu- ally rendered; (2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and (3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or busi- ness, of property to which the taxpayer has not taken or is not taking title or in which he has no equity. For purposes of the preceding sentence, the place of residence of a Member of Congress (in- cluding any Delegate and Resident Commis- sioner) within the State, congressional district, or possession which he represents in Congress shall be considered his home, but amounts ex- pended by such Members within each taxable year for living expenses shall not be deductible for income tax purposes. For purposes of para- graph (2), the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year. The preceding sentence shall not apply to any Federal employee during any period for which such employee is certified by the Attor- ney General (or the designee thereof) as trav- eling on behalf of the United States in tem- porary duty status to investigate or prosecute, or provide support services for the investigation or prosecution of, a Federal crime. (b) Charitable contributions and gifts excepted No deduction shall be allowed under sub- section (a) for any contribution or gift which would be allowable as a deduction under section 170 were it not for the percentage limitations, the dollar limitations, or the requirements as to the time of payment, set forth in such section. (c) Illegal bribes, kickbacks, and other payments (1) Illegal payments to government officials or employees No deduction shall be allowed under sub- section (a) for any payment made, directly or Page 726 TITLE 26—INTERNAL REVENUE CODE § 162 indirectly, to an official or employee of any government, or of any agency or instrumen- tality of any government, if the payment con- stitutes an illegal bribe or kickback or, if the payment is to an official or employee of a for- eign government, the payment is unlawful under the Foreign Corrupt Practices Act of 1977. The burden of proof in respect of the issue, for the purposes of this paragraph, as to whether a payment constitutes an illegal bribe or kickback (or is unlawful under the Foreign Corrupt Practices Act of 1977) shall be upon the Secretary to the same extent as he bears the burden of proof under section 7454 (con- cerning the burden of proof when the issue re- lates to fraud). (2) Other illegal payments No deduction shall be allowed under sub- section (a) for any payment (other than a pay- ment described in paragraph (1)) made, di- rectly or indirectly, to any person, if the pay- ment constitutes an illegal bribe, illegal kick- back, or other illegal payment under any law of the United States, or under any law of a State (but only if such State law is generally enforced), which subjects the payor to a crimi- nal penalty or the loss of license or privilege to engage in a trade or business. For purposes of this paragraph, a kickback includes a pay- ment in consideration of the referral of a cli- ent, patient, or customer. The burden of proof in respect of the issue, for purposes of this paragraph, as to whether a payment con- stitutes an illegal bribe, illegal kickback, or other illegal payment shall be upon the Sec- retary to the same extent as he bears the bur- den of proof under section 7454 (concerning the burden of proof when the issue relates to fraud). (3) Kickbacks, rebates, and bribes under medi- care and medicaid No deduction shall be allowed under sub- section (a) for any kickback, rebate, or bribe made by any provider of services, supplier, physician, or other person who furnishes items or services for which payment is or may be made under the Social Security Act, or in whole or in part out of Federal funds under a State plan approved under such Act, if such kickback, rebate, or bribe is made in connec- tion with the furnishing of such items or serv- ices or the making or receipt of such pay- ments. For purposes of this paragraph, a kick- back includes a payment in consideration of the referral of a client, patient, or customer. (d) Capital contributions to Federal National Mortgage Association For purposes of this subtitle, whenever the amount of capital contributions evidenced by a share of stock issued pursuant to section 303(c) of the Federal National Mortgage Association Charter Act (12 U.S.C., sec. 1718) exceeds the fair market value of the stock as of the issue date of such stock, the initial holder of the stock shall treat the excess as ordinary and necessary ex- penses paid or incurred during the taxable year in carrying on a trade or business. (e) Denial of deduction for certain lobbying and political expenditures (1) In general No deduction shall be allowed under sub- section (a) for any amount paid or incurred in connection with— (A) influencing legislation, (B) participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public of- fice, (C) any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referen- dums, or (D) any direct communication with a cov- ered executive branch official in an attempt to influence the official actions or positions of such official. (2) Application to dues of tax-exempt organiza- tions No deduction shall be allowed under sub- section (a) for the portion of dues or other similar amounts paid by the taxpayer to an or- ganization which is exempt from tax under this subtitle which the organization notifies the taxpayer under section 6033(e)(1)(A)(ii) is allocable to expenditures to which paragraph (1) applies. (3) Influencing legislation For purposes of this subsection— (A) In general The term ‘‘influencing legislation’’ means any attempt to influence any legislation through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of legis- lation. (B) Legislation The term ‘‘legislation’’ has the meaning given such term by section 4911(e)(2). (4) Other special rules (A) Exception for certain taxpayers In the case of any taxpayer engaged in the trade or business of conducting activities de- scribed in paragraph (1), paragraph (1) shall not apply to expenditures of the taxpayer in conducting such activities directly on behalf of another person (but shall apply to pay- ments by such other person to the taxpayer for conducting such activities). (B) De minimis exception (i) In general Paragraph (1) shall not apply to any in- house expenditures for any taxable year if such expenditures do not exceed $2,000. In determining whether a taxpayer exceeds the $2,000 limit under this clause, there shall not be taken into account overhead costs otherwise allocable to activities de- scribed in paragraphs (1)(A) and (D). (ii) In-house expenditures For purposes of clause (i), the term ‘‘in- house expenditures’’ means expenditures Page 727 TITLE 26—INTERNAL REVENUE CODE § 162 described in paragraphs (1)(A) and (D) other than— (I) payments by the taxpayer to a per- son engaged in the trade or business of conducting activities described in para- graph (1) for the conduct of such activi- ties on behalf of the taxpayer, or (II) dues or other similar amounts paid or incurred by the taxpayer which are al- locable to activities described in para- graph (1). (C) Expenses incurred in connection with lobbying and political activities Any amount paid or incurred for research for, or preparation, planning, or coordina- tion of, any activity described in paragraph (1) shall be treated as paid or incurred in connection with such activity. (5) Covered executive branch official For purposes of this subsection, the term ‘‘covered executive branch official’’ means— (A) the President, (B) the Vice President, (C) any officer or employee of the White House Office of the Executive Office of the President, and the 2 most senior level offi- cers of each of the other agencies in such Ex- ecutive Office, and (D)(i) any individual serving in a position in level I of the Executive Schedule under section 5312 of title 5, United States Code, (ii) any other individual designated by the President as having Cabinet level status, and (iii) any immediate deputy of an indi- vidual described in clause (i) or (ii). (6) Cross reference For reporting requirements and alternative taxes related to this subsection, see section 6033(e). (f) Fines, penalties, and other amounts (1) In general Except as provided in the following para- graphs of this subsection, no deduction other- wise allowable shall be allowed under this chapter for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or govern- mental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law. (2) Exception for amounts constituting restitu- tion or paid to come into compliance with law (A) In general Paragraph (1) shall not apply to any amount that— (i) the taxpayer establishes— (I) constitutes restitution (including remediation of property) for damage or harm which was or may be caused by the violation of any law or the potential vio- lation of any law, or (II) is paid to come into compliance with any law which was violated or oth- erwise involved in the investigation or inquiry described in paragraph (1), (ii) is identified as restitution or as an amount paid to come into compliance with such law, as the case may be, in the court order or settlement agreement, and (iii) in the case of any amount of restitu- tion for failure to pay any tax imposed under this title in the same manner as if such amount were such tax, would have been allowed as a deduction under this chapter if it had been timely paid. The identification under clause (ii) alone shall not be sufficient to make the establish- ment required under clause (i). (B) Limitation Subparagraph (A) shall not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation. (3) Exception for amounts paid or incurred as the result of certain court orders Paragraph (1) shall not apply to any amount paid or incurred by reason of any order of a court in a suit in which no government or gov- ernmental entity is a party. (4) Exception for taxes due Paragraph (1) shall not apply to any amount paid or incurred as taxes due. (5) Treatment of certain nongovernmental reg- ulatory entities For purposes of this subsection, the fol- lowing nongovernmental entities shall be treated as governmental entities: (A) Any nongovernmental entity which ex- ercises self-regulatory powers (including im- posing sanctions) in connection with a quali- fied board or exchange (as defined in section 1256(g)(7)). (B) To the extent provided in regulations, any nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) as part of performing an essential governmental function. (g) Treble damage payments under the antitrust laws If in a criminal proceeding a taxpayer is con- victed of a violation of the antitrust laws, or his plea of guilty or nolo contendere to an indict- ment or information charging such a violation is entered or accepted in such a proceeding, no deduction shall be allowed under subsection (a) for two-thirds of any amount paid or incurred— (1) on any judgment for damages entered against the taxpayer under section 4 of the Act entitled ‘‘An Act to supplement existing laws against unlawful restraints and monopo- lies, and for other purposes’’, approved Octo- ber 15, 1914 (commonly known as the Clayton Act), on account of such violation or any re- lated violation of the antitrust laws which oc- curred prior to the date of the final judgment of such conviction, or (2) in settlement of any action brought under such section 4 on account of such viola- tion or related violation. (h) State legislators’ travel expenses away from home (1) In general For purposes of subsection (a), in the case of any individual who is a State legislator at any Page 728 TITLE 26—INTERNAL REVENUE CODE § 162 time during the taxable year and who makes an election under this subsection for the tax- able year— (A) the place of residence of such indi- vidual within the legislative district which he represented shall be considered his home, (B) he shall be deemed to have expended for living expenses (in connection with his trade or business as a legislator) an amount equal to the sum of the amounts determined by multiplying each legislative day of such individual during the taxable year by the greater of— (i) the amount generally allowable with respect to such day to employees of the State of which he is a legislator for per diem while away from home, to the extent such amount does not exceed 110 percent of the amount described in clause (ii) with re- spect to such day, or (ii) the amount generally allowable with respect to such day to employees of the ex- ecutive branch of the Federal Government for per diem while away from home but serving in the United States, and (C) he shall be deemed to be away from home in the pursuit of a trade or business on each legislative day. (2) Legislative days For purposes of paragraph (1), a legislative day during any taxable year for any individual shall be any day during such year on which— (A) the legislature was in session (includ- ing any day in which the legislature was not in session for a period of 4 consecutive days or less), or (B) the legislature was not in session but the physical presence of the individual was formally recorded at a meeting of a com- mittee of such legislature. (3) Election An election under this subsection for any taxable year shall be made at such time and in such manner as the Secretary shall by regula- tions prescribe. (4) Section not to apply to legislators who re- side near capitol This subsection shall not apply to any legis- lator whose place of residence within the legis- lative district which he represents is 50 or fewer miles from the capitol building of the State. [(i) Repealed. Pub. L. 101–239, title VI, § 6202(b)(3)(A), Dec. 19, 1989, 103 Stat. 2233] (j) Certain foreign advertising expenses (1) In general No deduction shall be allowed under sub- section (a) for any expenses of an advertise- ment carried by a foreign broadcast under- taking and directed primarily to a market in the United States. This paragraph shall apply only to foreign broadcast undertakings lo- cated in a country which denies a similar de- duction for the cost of advertising directed primarily to a market in the foreign country when placed with a United States broadcast undertaking. (2) Broadcast undertaking For purposes of paragraph (1), the term ‘‘broadcast undertaking’’ includes (but is not limited to) radio and television stations. (k) Stock reacquisition expenses (1) In general Except as provided in paragraph (2), no de- duction otherwise allowable shall be allowed under this chapter for any amount paid or in- curred by a corporation in connection with the reacquisition of its stock or of the stock of any related person (as defined in section 465(b)(3)(C)). (2) Exceptions Paragraph (1) shall not apply to— (A) Certain specific deductions Any— (i) deduction allowable under section 163 (relating to interest), (ii) deduction for amounts which are properly allocable to indebtedness and am- ortized over the term of such indebtedness, or (iii) deduction for dividends paid (within the meaning of section 561). (B) Stock of certain regulated investment companies Any amount paid or incurred in connec- tion with the redemption of any stock in a regulated investment company which issues only stock which is redeemable upon the de- mand of the shareholder. (l) Special rules for health insurance costs of self-employed individuals (1) Allowance of deduction In the case of a taxpayer who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this sec- tion an amount equal to the amount paid dur- ing the taxable year for insurance which con- stitutes medical care for— (A) the taxpayer, (B) the taxpayer’s spouse, (C) the taxpayer’s dependents, and (D) any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. (2) Limitations (A) Dollar amount No deduction shall be allowed under para- graph (1) to the extent that the amount of such deduction exceeds the taxpayer’s earned income (within the meaning of sec- tion 401(c)) derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established. (B) Other coverage Paragraph (1) shall not apply to any tax- payer for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the spouse of, or any dependent, or individual described in subparagraph (D) of paragraph (1) with re- Page 729 TITLE 26—INTERNAL REVENUE CODE § 162 spect to, the taxpayer. The preceding sen- tence shall be applied separately with re- spect to— (i) plans which include coverage for qualified long-term care services (as de- fined in section 7702B(c)) or are qualified long-term care insurance contracts (as de- fined in section 7702B(b)), and (ii) plans which do not include such cov- erage and are not such contracts. (C) Long-term care premiums In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care pre- miums (as defined in section 213(d)(10)) shall be taken into account under paragraph (1). (3) Coordination with medical deduction Any amount paid by a taxpayer for insur- ance to which paragraph (1) applies shall not be taken into account in computing the amount allowable to the taxpayer as a deduc- tion under section 213(a). (4) Deduction not allowed for self-employment tax purposes The deduction allowable by reason of this subsection shall not be taken into account in determining an individual’s net earnings from self-employment (within the meaning of sec- tion 1402(a)) for purposes of chapter 2 for tax- able years beginning before January 1, 2010, or after December 31, 2010. (5) Treatment of certain S corporation share- holders This subsection shall apply in the case of any individual treated as a partner under sec- tion 1372(a), except that— (A) for purposes of this subsection, such in- dividual’s wages (as defined in section 3121) from the S corporation shall be treated as such individual’s earned income (within the meaning of section 401(c)(1)), and (B) there shall be such adjustments in the application of this subsection as the Sec- retary may by regulations prescribe. (m) Certain excessive employee remuneration (1) In general In the case of any publicly held corporation, no deduction shall be allowed under this chap- ter for applicable employee remuneration with respect to any covered employee to the extent that the amount of such remuneration for the taxable year with respect to such employee ex- ceeds $1,000,000. (2) Publicly held corporation For purposes of this subsection, the term ‘‘publicly held corporation’’ means any cor- poration which is an issuer (as defined in sec- tion 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c))— (A) the securities of which are required to be registered under section 12 of such Act (15 U.S.C. 78l), or (B) that is required to file reports under section 15(d) of such Act (15 U.S.C. 78o(d)). (3) Covered employee For purposes of this subsection, the term ‘‘covered employee’’ means any employee of the taxpayer if— (A) such employee is the principal execu- tive officer or principal financial officer of the taxpayer at any time during the taxable year, or was an individual acting in such a capacity, (B) the total compensation of such em- ployee for the taxable year is required to be reported to shareholders under the Securi- ties Exchange Act of 1934 by reason of such employee being among the 3 highest com- pensated officers for the taxable year (other than any individual described in subpara- graph (A)), (C) in the case of taxable years beginning after December 31, 2026, such employee is among the 5 highest compensated employees for the taxable year other than any indi- vidual described in subparagraph (A) or (B), or (D) was a covered employee described in subparagraph (A) or (B) of the taxpayer (or any predecessor) for any preceding taxable year beginning after December 31, 2016. Such term shall include any employee who would be described in subparagraph (B) if the reporting described in such subparagraph were required as so described. (4) Applicable employee remuneration For purposes of this subsection— (A) In general Except as otherwise provided in this para- graph, the term ‘‘applicable employee remu- neration’’ means, with respect to any cov- ered employee for any taxable year, the ag- gregate amount allowable as a deduction under this chapter for such taxable year (de- termined without regard to this subsection) for remuneration for services performed by such employee (whether or not during the taxable year). (B) Exception for existing binding contracts The term ‘‘applicable employee remunera- tion’’ shall not include any remuneration payable under a written binding contract which was in effect on February 17, 1993, and which was not modified thereafter in any material respect before such remuneration is paid. (C) Remuneration For purposes of this paragraph, the term ‘‘remuneration’’ includes any remuneration (including benefits) in any medium other than cash, but shall not include— (i) any payment referred to in so much of section 3121(a)(5) as precedes subparagraph (E) thereof, and (ii) any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from gross income under this chap- ter. For purposes of clause (i), section 3121(a)(5) shall be applied without regard to section 3121(v)(1). (D) Coordination with disallowed golden parachute payments The dollar limitation contained in para- graph (1) shall be reduced (but not below Page 730 TITLE 26—INTERNAL REVENUE CODE § 162 zero) by the amount (if any) which would have been included in the applicable em- ployee remuneration of the covered em- ployee for the taxable year but for being dis- allowed under section 280G. (E) Coordination with excise tax on specified stock compensation The dollar limitation contained in para- graph (1) with respect to any covered em- ployee shall be reduced (but not below zero) by the amount of any payment (with respect to such employee) of the tax imposed by sec- tion 4985 directly or indirectly by the expa- triated corporation (as defined in such sec- tion) or by any member of the expanded af- filiated group (as defined in such section) which includes such corporation. (F) Special rule for remuneration paid to beneficiaries, etc. Remuneration shall not fail to be applica- ble employee remuneration merely because it is includible in the income of, or paid to, a person other than the covered employee, including after the death of the covered em- ployee. (5) Special rule for application to employers participating in the Troubled Assets Relief Program (A) In general In the case of an applicable employer, no deduction shall be allowed under this chap- ter— (i) in the case of executive remuneration for any applicable taxable year which is attributable to services performed by a covered executive during such applicable taxable year, to the extent that the amount of such remuneration exceeds $500,000, or (ii) in the case of deferred deduction ex- ecutive remuneration for any taxable year for services performed during any applica- ble taxable year by a covered executive, to the extent that the amount of such remu- neration exceeds $500,000 reduced (but not below zero) by the sum of— (I) the executive remuneration for such applicable taxable year, plus (II) the portion of the deferred deduc- tion executive remuneration for such services which was taken into account under this clause in a preceding taxable year. (B) Applicable employer For purposes of this paragraph— (i) In general Except as provided in clause (ii), the term ‘‘applicable employer’’ means any employer from whom 1 or more troubled assets are acquired under a program estab- lished by the Secretary under section 101(a) of the Emergency Economic Sta- bilization Act of 2008 if the aggregate amount of the assets so acquired for all taxable years exceeds $300,000,000. (ii) Disregard of certain assets sold through direct purchase If the only sales of troubled assets by an employer under the program described in clause (i) are through 1 or more direct pur- chases (within the meaning of section 113(c) of the Emergency Economic Sta- bilization Act of 2008), such assets shall not be taken into account under clause (i) in determining whether the employer is an applicable employer for purposes of this paragraph. (iii) Aggregation rules Two or more persons who are treated as a single employer under subsection (b) or (c) of section 414 shall be treated as a sin- gle employer, except that in applying sec- tion 1563(a) for purposes of either such sub- section, paragraphs (2) and (3) thereof shall be disregarded. (C) Applicable taxable year For purposes of this paragraph, the term ‘‘applicable taxable year’’ means, with re- spect to any employer— (i) the first taxable year of the em- ployer— (I) which includes any portion of the period during which the authorities under section 101(a) of the Emergency Economic Stabilization Act of 2008 are in effect (determined under section 120 thereof), and (II) in which the aggregate amount of troubled assets acquired from the em- ployer during the taxable year pursuant to such authorities (other than assets to which subparagraph (B)(ii) applies), when added to the aggregate amount so acquired for all preceding taxable years, exceeds $300,000,000, and (ii) any subsequent taxable year which includes any portion of such period. (D) Covered executive For purposes of this paragraph— (i) In general The term ‘‘covered executive’’ means, with respect to any applicable taxable year, any employee— (I) who, at any time during the portion of the taxable year during which the au- thorities under section 101(a) of the Emergency Economic Stabilization Act of 2008 are in effect (determined under section 120 thereof), is the chief execu- tive officer of the applicable employer or the chief financial officer of the applica- ble employer, or an individual acting in either such capacity, or (II) who is described in clause (ii). (ii) Highest compensated employees An employee is described in this clause if the employee is 1 of the 3 highest com- pensated officers of the applicable em- ployer for the taxable year (other than an individual described in clause (i)(I)), deter- mined— (I) on the basis of the shareholder dis- closure rules for compensation under the Securities Exchange Act of 1934 (without regard to whether those rules apply to the employer), and Page 731 TITLE 26—INTERNAL REVENUE CODE § 162 (II) by only taking into account em- ployees employed during the portion of the taxable year described in clause (i)(I). (iii) Employee remains covered executive If an employee is a covered executive with respect to an applicable employer for any applicable taxable year, such em- ployee shall be treated as a covered execu- tive with respect to such employer for all subsequent applicable taxable years and for all subsequent taxable years in which deferred deduction executive remuneration with respect to services performed in all such applicable taxable years would (but for this paragraph) be deductible. (E) Executive remuneration For purposes of this paragraph, the term ‘‘executive remuneration’’ means the appli- cable employee remuneration of the covered executive, as determined under paragraph (4) without regard to subparagraph (B) thereof. Such term shall not include any deferred de- duction executive remuneration with respect to services performed in a prior applicable taxable year. (F) Deferred deduction executive remunera- tion For purposes of this paragraph, the term ‘‘deferred deduction executive remunera- tion’’ means remuneration which would be executive remuneration for services per- formed in an applicable taxable year but for the fact that the deduction under this chap- ter (determined without regard to this para- graph) for such remuneration is allowable in a subsequent taxable year. (G) Coordination Rules similar to the rules of subparagraphs (D) and (E) of paragraph (4) shall apply for purposes of this paragraph. (H) Regulatory authority The Secretary may prescribe such guid- ance, rules, or regulations as are necessary to carry out the purposes of this paragraph and the Emergency Economic Stabilization Act of 2008, including the extent to which this paragraph applies in the case of any ac- quisition, merger, or reorganization of an applicable employer. (6) Special rule for application to certain health insurance providers (A) In general No deduction shall be allowed under this chapter— (i) in the case of applicable individual re- muneration which is for any disqualified taxable year beginning after December 31, 2012, and which is attributable to services performed by an applicable individual dur- ing such taxable year, to the extent that the amount of such remuneration exceeds $500,000, or (ii) in the case of deferred deduction re- muneration for any taxable year beginning after December 31, 2012, which is attrib- utable to services performed by an applica- ble individual during any disqualified tax- able year beginning after December 31, 2009, to the extent that the amount of such remuneration exceeds $500,000 reduced (but not below zero) by the sum of— (I) the applicable individual remunera- tion for such disqualified taxable year, plus (II) the portion of the deferred deduc- tion remuneration for such services which was taken into account under this clause in a preceding taxable year (or which would have been taken into ac- count under this clause in a preceding taxable year if this clause were applied by substituting ‘‘December 31, 2009’’ for ‘‘December 31, 2012’’ in the matter pre- ceding subclause (I)). (B) Disqualified taxable year For purposes of this paragraph, the term ‘‘disqualified taxable year’’ means, with re- spect to any employer, any taxable year for which such employer is a covered health in- surance provider. (C) Covered health insurance provider For purposes of this paragraph— (i) In general The term ‘‘covered health insurance pro- vider’’ means— (I) with respect to taxable years begin- ning after December 31, 2009, and before January 1, 2013, any employer which is a health insurance issuer (as defined in section 9832(b)(2)) and which receives premiums from providing health insur- ance coverage (as defined in section 9832(b)(1)), and (II) with respect to taxable years be- ginning after December 31, 2012, any em- ployer which is a health insurance issuer (as defined in section 9832(b)(2)) and with respect to which not less than 25 percent of the gross premiums received from pro- viding health insurance coverage (as de- fined in section 9832(b)(1)) is from min- imum essential coverage (as defined in section 5000A(f)). (ii) Aggregation rules Two or more persons who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer, except that in applying section 1563(a) for purposes of any such subsection, paragraphs (2) and (3) thereof shall be disregarded. (D) Applicable individual remuneration For purposes of this paragraph, the term ‘‘applicable individual remuneration’’ means, with respect to any applicable indi- vidual for any disqualified taxable year, the aggregate amount allowable as a deduction under this chapter for such taxable year (de- termined without regard to this subsection) for remuneration (as defined in paragraph (4) without regard to subparagraph (B) thereof) for services performed by such individual (whether or not during the taxable year). Such term shall not include any deferred de- Page 732 TITLE 26—INTERNAL REVENUE CODE § 162 duction remuneration with respect to serv- ices performed during the disqualified tax- able year. (E) Deferred deduction remuneration For purposes of this paragraph, the term ‘‘deferred deduction remuneration’’ means remuneration which would be applicable in- dividual remuneration for services per- formed in a disqualified taxable year but for the fact that the deduction under this chap- ter (determined without regard to this para- graph) for such remuneration is allowable in a subsequent taxable year. (F) Applicable individual For purposes of this paragraph, the term ‘‘applicable individual’’ means, with respect to any covered health insurance provider for any disqualified taxable year, any indi- vidual— (i) who is an officer, director, or em- ployee in such taxable year, or (ii) who provides services for or on behalf of such covered health insurance provider during such taxable year. (G) Coordination Rules similar to the rules of subparagraphs (D) and (E) of paragraph (4) shall apply for purposes of this paragraph. (H) Regulatory authority The Secretary may prescribe such guid- ance, rules, or regulations as are necessary to carry out the purposes of this paragraph. (n) Special rule for certain group health plans (1) In general No deduction shall be allowed under this chapter to an employer for any amount paid or incurred in connection with a group health plan if the plan does not reimburse for inpa- tient hospital care services provided in the State of New York— (A) except as provided in subparagraphs (B) and (C), at the same rate as licensed commercial insurers are required to reim- burse hospitals for such services when such reimbursement is not through such a plan, (B) in the case of any reimbursement through a health maintenance organization, at the same rate as health maintenance or- ganizations are required to reimburse hos- pitals for such services for individuals not covered by such a plan (determined without regard to any government-supported individ- uals exempt from such rate), or (C) in the case of any reimbursement through any corporation organized under Ar- ticle 43 of the New York State Insurance Law, at the same rate as any such corpora- tion is required to reimburse hospitals for such services for individuals not covered by such a plan. (2) State law exception Paragraph (1) shall not apply to any group health plan which is not required under the laws of the State of New York (determined without regard to this subsection or other pro- visions of Federal law) to reimburse at the rates provided in paragraph (1). (3) Group health plan For purposes of this subsection, the term ‘‘group health plan’’ means a plan of, or con- tributed to by, an employer or employee orga- nization (including a self-insured plan) to pro- vide health care (directly or otherwise) to any employee, any former employee, the employer, or any other individual associated or formerly associated with the employer in a business re- lationship, or any member of their family. (o) Treatment of certain expenses of rural mail carriers (1) General rule In the case of any employee of the United States Postal Service who performs services involving the collection and delivery of mail on a rural route and who receives qualified re- imbursements for the expenses incurred by such employee for the use of a vehicle in per- forming such services— (A) the amount allowable as a deduction under this chapter for the use of a vehicle in performing such services shall be equal to the amount of such qualified reimburse- ments; and (B) such qualified reimbursements shall be treated as paid under a reimbursement or other expense allowance arrangement for purposes of section 62(a)(2)(A) (and section 62(c) shall not apply to such qualified reim- bursements). (2) Special rule where expenses exceed reim- bursements Notwithstanding paragraph (1)(A), if the ex- penses incurred by an employee for the use of a vehicle in performing services described in paragraph (1) exceed the qualified reimburse- ments for such expenses, such excess shall be taken into account in computing the miscella- neous itemized deductions of the employee under section 67. (3) Definition of qualified reimbursements For purposes of this subsection, the term ‘‘qualified reimbursements’’ means the amounts paid by the United States Postal Service to employees as an equipment mainte- nance allowance under the 1991 collective bar- gaining agreement between the United States Postal Service and the National Rural Letter Carriers’ Association. Amounts paid as an equipment maintenance allowance by such Postal Service under later collective bar- gaining agreements that supersede the 1991 agreement shall be considered qualified reim- bursements if such amounts do not exceed the amounts that would have been paid under the 1991 agreement, adjusted by increasing any such amount under the 1991 agreement by an amount equal to— (A) such amount, multiplied by (B) the cost-of-living adjustment deter- mined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘‘calendar year 1990’’ for ‘‘cal- endar year 2016’’ in subparagraph (A)(ii) thereof. Page 733 TITLE 26—INTERNAL REVENUE CODE § 162 (p) Treatment of expenses of members of reserve component of Armed Forces of the United States For purposes of subsection (a)(2), in the case of an individual who performs services as a mem- ber of a reserve component of the Armed Forces of the United States at any time during the tax- able year, such individual shall be deemed to be away from home in the pursuit of a trade or business for any period during which such indi- vidual is away from home in connection with such service. (q) Payments related to sexual harassment and sexual abuse No deduction shall be allowed under this chap- ter for— (1) any settlement or payment related to sexual harassment or sexual abuse if such set- tlement or payment is subject to a nondisclo- sure agreement, or (2) attorney’s fees related to such a settle- ment or payment. (r) Disallowance of FDIC premiums paid by cer- tain large financial institutions (1) In general No deduction shall be allowed for the appli- cable percentage of any FDIC premium paid or incurred by the taxpayer. (2) Exception for small institutions Paragraph (1) shall not apply to any tax- payer for any taxable year if the total consoli- dated assets of such taxpayer (determined as of the close of such taxable year) do not ex- ceed $10,000,000,000. (3) Applicable percentage For purposes of this subsection, the term ‘‘applicable percentage’’ means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which— (A) the excess of— (i) the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over (ii) $10,000,000,000, bears to (B) $40,000,000,000. (4) FDIC premiums For purposes of this subsection, the term ‘‘FDIC premium’’ means any assessment im- posed under section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)). (5) Total consolidated assets For purposes of this subsection, the term ‘‘total consolidated assets’’ has the meaning given such term under section 165 of the Dodd- Frank Wall Street Reform and Consumer Pro- tection Act (12 U.S.C. 5365). (6) Aggregation rule (A) In general Members of an expanded affiliated group shall be treated as a single taxpayer for pur- poses of applying this subsection. (B) Expanded affiliated group (i) In general For purposes of this paragraph, the term ‘‘expanded affiliated group’’ means an af- filiated group as defined in section 1504(a), determined— (I) by substituting ‘‘more than 50 per- cent’’ for ‘‘at least 80 percent’’ each place it appears, and (II) without regard to paragraphs (2) and (3) of section 1504(b). (ii) Control of non-corporate entities A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the mean- ing of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this clause). (s) Cross reference (1) For special rule relating to expenses in connec- tion with subdividing real property for sale, see sec- tion 1237. (2) For special rule relating to the treatment of payments by a transferee of a franchise, trademark, or trade name, see section 1253. (3) For special rules relating to— (A) funded welfare benefit plans, see section 419, and (B) deferred compensation and other deferred benefits, see section 404. (Aug. 16, 1954, ch. 736, 68A Stat. 45; Pub. L. 85–866, title I, § 5(a), Sept. 2, 1958, 72 Stat. 1608; Pub. L. 86–779, §§ 7(b), 8(a), Sept. 14, 1960, 74 Stat. 1002, 1003; Pub. L. 87–834, §§ 3(a), 4(b), Oct. 16, 1962, 76 Stat. 973, 976; Pub. L. 91–172, title V, § 516(c)(2)(A), title IX, § 902(a), (b), Dec. 30, 1969, 83 Stat. 648, 710; Pub. L. 92–178, title III, § 310(a), Dec. 10, 1971, 85 Stat. 525; Pub. L. 94–455, title XIX, §§ 1901(c)(4), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1803, 1834; Pub. L. 97–34, title I, § 127(a), Aug. 13, 1981, 95 Stat. 202; Pub. L. 97–35, title XXI, § 2146(b), Aug. 13, 1981, 95 Stat. 801; Pub. L. 97–51, § 139(b)(1), Oct. 1, 1981, 95 Stat. 967; Pub. L. 97–216, title II, § 215(a), July 18, 1982, 96 Stat. 194; Pub. L. 97–248, title I, § 128(b), title II, § 288(a), Sept. 3, 1982, 96 Stat. 366, 571; Pub. L. 98–369, div. A, title V, § 512(b), div. B, title III, § 2354(d), July 18, 1984, 98 Stat. 863, 1102; Pub. L. 98–573, title II, § 232(a), Oct. 30, 1984, 98 Stat. 2991; Pub. L. 99–272, title X, § 10001(a), (c), (d), Apr. 7, 1986, 100 Stat. 222, 223, 227; Pub. L. 99–509, title IX, §§ 9307(c)(2)(B), 9501(a)(1), (b)(1)(A), (2)(A), (c)(1), (d)(1), Oct. 21, 1986, 100 Stat. 1995, 2075–2077; Pub. L. 99–514, title VI, § 613(a), title XI, § 1161(a), title XVIII, § 1895(d)(1)(A), (2)(A), (3)(A), (4)(A), (5)(A), (6)(A), (7), Oct. 22, 1986, 100 Stat. 2251, 2509, 2936–2940; Pub. L. 100–647, title I, §§ 1011B(b)(1)–(3), 1018(t)(7)(B), title III, § 3011(b)(2), (3), Nov. 10, 1988, 102 Stat. 3488, 3589, 3624, 3625; Pub. L. 101–140, title II, § 203(a)(4), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101–239, title VI, § 6202(b)(3)(A), title VII, §§ 7107(a)(1), (b), 7862(c)(3)(A), Dec. 19, 1989, 103 Stat. 2233, 2306, 2432; Pub. L. 101–508, title XI, §§ 11111(d)(2), 11410(a), Nov. 5, 1990, 104 Stat. 1388–413, 1388–479; Pub. L. 102–227, title I, § 110(a)(1), Dec. 11, 1991, 105 Stat. 1688; Pub. L. 102–486, title XIX, § 1938(a), Oct. 24, 1992, 106 Stat. 3033; Pub. L. 103–66, title XIII, §§ 13131(d)(2), 13174(a)(1), (b)(1), 13211(a), 13222(a), 13442(a), Aug. 10, 1993, 107 Stat. 435, 457, 469, 477, 568; Pub. L. 104–7, § 1(a), (b), Apr. 11, 1995, 109 Stat. 93; Pub. L. 104–188, title I, Page 734 TITLE 26—INTERNAL REVENUE CODE § 162 § 1704(p)(1)–(3), Aug. 20, 1996, 110 Stat. 1886; Pub. L. 104–191, title III, §§ 311(a), 322(b)(2)(B), Aug. 21, 1996, 110 Stat. 2053, 2060; Pub. L. 105–34, title IX, § 934(a), title XII, §§ 1203(a), 1204(a), title XVI, § 1602(c), Aug. 5, 1997, 111 Stat. 882, 994, 995, 1094; Pub. L. 105–206, title VI, § 6012(a), July 22, 1998, 112 Stat. 818; Pub. L. 105–277, div. J, title II, § 2002(a), Oct. 21, 1998, 112 Stat. 2681–901; Pub. L. 108–121, title I, § 109(a), Nov. 11, 2003, 117 Stat. 1341; Pub. L. 108–357, title III, § 318(a), (b), title VIII, § 802(b)(2), Oct. 22, 2004, 118 Stat. 1470, 1568; Pub. L. 110–343, div. A, title III, § 302(a), Oct. 3, 2008, 122 Stat. 3803; Pub. L. 111–148, title IX, § 9014(a), title X, § 10108(g)(1), Mar. 23, 2010, 124 Stat. 868, 913; Pub. L. 111–152, title I, § 1004(d)(2), (3), Mar. 30, 2010, 124 Stat. 1035; Pub. L. 111–240, title II, § 2042(a), Sept. 27, 2010, 124 Stat. 2560; Pub. L. 112–10, div. B, title VIII, § 1858(b)(3), Apr. 15, 2011, 125 Stat. 169; Pub. L. 113–295, div. A, title II, § 221(a)(23), (24), Dec. 19, 2014, 128 Stat. 4040; Pub. L. 115–97, title I, §§ 11002(d)(6), 13306(a)(1), 13307(a), 13308(a), 13311(a), 13531(a), 13601(a)–(d), Dec. 22, 2017, 131 Stat. 2061, 2126, 2129, 2132, 2153, 2155, 2156; Pub. L. 117–2, title IX, § 9708, Mar. 11, 2021, 135 Stat. 206.) Editorial Notes REFERENCES IN TEXT The Foreign Corrupt Practices Act of 1977, referred to in subsec. (c)(1), is title I of Pub. L. 95–213, Dec. 19, 1977, 91 Stat. 1494, which enacted sections 78dd–1 to 78dd–3 of Title 15, Commerce and Trade, and amended sections 78m and 78ff of Title 15. For complete classification of this Act to the Code, see Short Title of 1977 Amend- ment note set out under section 78a of Title 15 and Ta- bles. The Social Security Act, referred to in subsec. (c)(3), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, which is classi- fied generally to chapter 7 (§ 301 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. Section 4 of the Clayton Act, referred to in subsec. (g)(1), is classified to section 15 of Title 15, Commerce and Trade. The Securities Exchange Act of 1934, referred to in subsec. (m)(3)(B), (5)(D)(ii)(I), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see sec- tion 78a of Title 15 and Tables. The Emergency Economic Stabilization Act of 2008, referred to in subsec. (m)(5), is div. A of Pub. L. 110–343, Oct. 3, 2008, 122 Stat. 3765, which is classified prin- cipally to chapter 52 (§ 5201 et seq.) of Title 12, Banks and Banking. Section 101(a) of the Act enacted section 5211(a) of Title 12 and amended section 5315 of Title 5, Government Organization and Employees, and section 301 of Title 31, Money and Finance. Section 113(c) of the Act is classified to section 5223(c) of Title 12. Section 120 of the Act is classified to section 5230 of Title 12. For complete classification of this Act to the Code, see Short Title note set out under section 5201 of Title 12 and Tables. AMENDMENTS 2021—Subsec. (m)(3)(C), (D). Pub. L. 117–2 added sub- par. (C), redesignated former subpar. (C) as (D), and, in subpar. (D), substituted ‘‘employee described in sub- paragraph (A) or (B)’’ for ‘‘employee’’. 2017—Subsec. (a). Pub. L. 115–97, § 13311(a), struck out ‘‘in excess of $3,000’’ after ‘‘income tax purposes’’ in concluding provisions. Subsec. (e)(2) to (8). Pub. L. 115–97, § 13308(a), redesig- nated pars. (3) to (6) and (8) as (2) to (6), respectively, and struck out former par. (2) relating to exception for local legislation and par. (7) relating to special rule for Indian tribal governments. Subsec. (f). Pub. L. 115–97, § 13306(a)(1), amended sub- sec. (f) generally. Prior to amendment, text read as fol- lows: ‘‘No deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law.’’ Subsec. (m)(2). Pub. L. 115–97, § 13601(c)(1), amended par. (2) generally. Prior to amendment, text read as fol- lows: ‘‘For purposes of this subsection, the term ‘pub- licly held corporation’ means any corporation issuing any class of common equity securities required to be registered under section 12 of the Securities Exchange Act of 1934.’’ Subsec. (m)(3). Pub. L. 115–97, § 13601(c)(2), inserted concluding provisions. Subsec. (m)(3)(A). Pub. L. 115–97, § 13601(b)(1), sub- stituted ‘‘such employee is the principal executive offi- cer or principal financial officer of the taxpayer at any time during the taxable year, or was’’ for ‘‘as of the close of the taxable year, such employee is the chief ex- ecutive officer of the taxpayer or is’’. Subsec. (m)(3)(B). Pub. L. 115–97, § 13601(b)(2), sub- stituted ‘‘3’’ for ‘‘4’’ and ‘‘(other than any individual de- scribed in subparagraph (A))’’ for ‘‘(other than the chief executive officer)’’. Subsec. (m)(3)(C). Pub. L. 115–97, § 13601(b)(3), added subpar. (C). Subsec. (m)(4)(B) to (E). Pub. L. 115–97, § 13601(a)(1), redesignated subpars. (D) to (G) as (B) to (E), respec- tively, and struck out former subpar. (B) relating to an exemption to the term ‘‘applicable employee remunera- tion’’ and former subpar. (C) relating to the term ‘‘ap- plicable employee remuneration’’. Subsec. (m)(4)(F). Pub. L. 115–97, § 13601(a)(1), (d), added subpar. (F) and redesignated former subpar. (F) as (D). Subsec. (m)(4)(G). Pub. L. 115–97, § 13601(a)(1), redesig- nated subpar. (G) as (E). Subsec. (m)(5)(E). Pub. L. 115–97, § 13601(a)(2)(A), sub- stituted ‘‘subparagraph (B)’’ for ‘‘subparagraphs (B), (C), and (D)’’. Subsec. (m)(5)(G). Pub. L. 115–97, § 13601(a)(2)(B), sub- stituted ‘‘(D) and (E)’’ for ‘‘(F) and (G)’’. Subsec. (m)(6)(D). Pub. L. 115–97, § 13601(a)(2)(A), sub- stituted ‘‘subparagraph (B)’’ for ‘‘subparagraphs (B), (C), and (D)’’. Subsec. (m)(6)(G). Pub. L. 115–97, § 13601(a)(2)(B), sub- stituted ‘‘(D) and (E)’’ for ‘‘(F) and (G)’’. Subsec. (o)(3). Pub. L. 115–97, § 11002(d)(6), substituted ‘‘adjusted by increasing any such amount under the 1991 agreement by an amount equal to—’’ and subpars. (A) and (B) for ‘‘adjusted for changes in the Consumer Price Index (as defined in section 1(f)(5)) since 1991.’’ Subsec. (q). Pub. L. 115–97, § 13307(a), added subsec. (q). Former subsec. (q) redesignated (r), then (s). Subsec. (r). Pub. L. 115–97, § 13531(a), added subsec. (r). Subsec. (s). Pub. L. 115–97, §§ 13307(a), 13531(a), redesig- nated subsec. (q) as (r), then (s). 2014—Subsec. (g). Pub. L. 113–295, § 221(a)(23), struck out concluding provisions which read as follows: ‘‘The preceding sentence shall not apply with respect to any conviction or plea before January 1, 1970, or to any con- viction or plea on or after such date in a new trial fol- lowing an appeal of a conviction before such date.’’ Subsec. (h)(4). Pub. L. 113–295, § 221(a)(24), substituted ‘‘This subsection’’ for ‘‘For taxable years beginning after December 31, 1980, this subsection’’. 2011—Subsec. (a). Pub. L. 112–10 struck out last sen- tence in concluding provisions which read as follows: ‘‘For purposes of paragraph (1), the amount of a free choice voucher provided under section 10108 of the Pa- tient Protection and Affordable Care Act shall be treat- ed as an amount for compensation for personal services actually rendered.’’ 2010—Subsec. (a). Pub. L. 111–148, § 10108(g)(1), inserted at end of concluding provisions ‘‘For purposes of para- graph (1), the amount of a free choice voucher provided under section 10108 of the Patient Protection and Af- Page 735 TITLE 26—INTERNAL REVENUE CODE § 162 fordable Care Act shall be treated as an amount for compensation for personal services actually rendered.’’ Subsec. (l)(1). Pub. L. 111–152, § 1004(d)(2), amended par. (1) generally. Prior to amendment, par. (1) author- ized a deduction in an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents. Subsec. (l)(2)(B). Pub. L. 111–152, § 1004(d)(3), inserted ‘‘, or any dependent, or individual described in subpara- graph (D) of paragraph (1) with respect to,’’ after ‘‘spouse of’’ in introductory provisions. Subsec. (l)(4). Pub. L. 111–240 inserted ‘‘for taxable years beginning before January 1, 2010, or after Decem- ber 31, 2010’’ before period at end. Subsec. (m)(6). Pub. L. 111–148, § 9014(a), added par. (6). 2008—Subsec. (m)(5). Pub. L. 110–343 added par. (5). 2004—Subsec. (m)(4)(G). Pub. L. 108–357, § 802(b)(2), added subpar. (G). Subsec. (o). Pub. L. 108–357, § 318(b), struck out ‘‘reim- bursed’’ before ‘‘expenses’’ in heading. Subsec. (o)(2), (3). Pub. L. 108–357, § 318(a), added par. (2) and redesignated former par. (2) as (3). 2003—Subsecs. (p), (q). Pub. L. 108–121 added subsec. (p) and redesignated former subsec. (p) as (q). 1998—Subsec. (a). Pub. L. 105–206, in last sentence, substituted ‘‘investigate or prosecute, or provide sup- port services for the investigation or prosecution of, a Federal crime.’’ for ‘‘investigate, or provide support services for the investigation of, a Federal crime.’’ Subsec. (l)(1)(B). Pub. L. 105–277 amended table in sub- par. (B) generally. Prior to amendment, table read as follows: ‘‘For taxable years beginning in calendar year— The applicable percentage is— 1997 ............................................. 40 1998 and 1999 ............................... 45 2000 and 2001 ............................... 50 2002 ............................................. 60 2003 through 2005 ........................ 80 2006 ............................................. 90 2007 and thereafter ..................... 100.’’ 1997—Subsec. (a). Pub. L. 105–34, § 1204(a), inserted at end of concluding provisions ‘‘The preceding sentence shall not apply to any Federal employee during any pe- riod for which such employee is certified by the Attor- ney General (or the designee thereof) as traveling on behalf of the United States in temporary duty status to investigate, or provide support services for the inves- tigation of, a Federal crime.’’ Subsec. (l)(1)(B). Pub. L. 105–34, § 934(a), amended table generally. Prior to amendment, table read as fol- lows: ‘‘For taxable years beginning in calendar year— The applicable percentage is— 1997 ............................................. 40 percent 1998 through 2002 ........................ 45 percent 2003 ............................................. 50 percent 2004 ............................................. 60 percent 2005 ............................................. 70 percent 2006 or thereafter ....................... 80 percent.’’ Subsec. (l)(2)(B). Pub. L. 105–34, § 1602(c), inserted ‘‘The preceding sentence shall be applied separately with respect to—’’ at end and added cls. (i) and (ii). Subsecs. (o), (p). Pub. L. 105–34, § 1203(a), added subsec. (o) and redesignated former subsec. (o) as (p). 1996—Subsec. (k). Pub. L. 104–188, § 1704(p)(3), sub- stituted ‘‘reaquisition’’ for ‘‘redemption’’ in heading. Subsec. (k)(1). Pub. L. 104–188, § 1704(p)(1), substituted ‘‘the reacquisition of its stock or of the stock of any re- lated person (as defined in section 465(b)(3)(C))’’ for ‘‘the redemption of its stock’’. Subsec. (k)(2)(A). Pub. L. 104–188, § 1704(p)(2), struck out ‘‘or’’ at end of cl. (i), added cl. (ii), and redesignated former cl. (ii) as (iii). Subsec. (l)(1). Pub. L. 104–191, § 311(a), amended par. (1) generally. Prior to amendment, par. (1) read as follows: ‘‘(1) IN GENERAL.—In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 30 percent of the amount paid dur- ing the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and depend- ents.’’ Subsec. (l)(2)(C). Pub. L. 104–191, § 322(b)(2)(B), added subpar. (C). 1995—Subsec. (l)(1). Pub. L. 104–7, § 1(b), substituted ‘‘30 percent’’ for ‘‘25 percent’’. Subsec. (l)(6). Pub. L. 104–7, § 1(a), struck out par. (6) ‘‘Termination’’ which read as follows: ‘‘This subsection shall not apply to any taxable year beginning after De- cember 31, 1993.’’ 1993—Subsec. (e). Pub. L. 103–66, § 13222(a), amended heading and text generally. Prior to amendment, text consisted of pars. (1) and (2) relating to deduction of or- dinary and necessary expenses paid or incurred in con- nection with certain activities relating to congres- sional, State, and local legislation. Subsec. (l)(2)(B). Pub. L. 103–66, § 13174(b)(1), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: ‘‘Paragraph (1) shall not apply to any taxpayer who is eligible to participate in any subsidized health plan maintained by any em- ployer of the taxpayer or of the spouse of the tax- payer.’’ Subsec. (l)(3). Pub. L. 103–66, § 13131(d)(2), amended heading and text of par. (3) generally. Prior to amend- ment, text read as follows: ‘‘(A) MEDICAL DEDUCTION.—Any amount paid by a tax- payer for insurance to which paragraph (1) applies shall not be taken into account in computing the amount al- lowable to the taxpayer as a deduction under section 213(a). ‘‘(B) HEALTH INSURANCE CREDIT.—The amount other- wise taken into account under paragraph (1) as paid for insurance which constitutes medical care shall be re- duced by the amount (if any) of the health insurance credit allowable to the taxpayer for the taxable year under section 32.’’ Subsec. (l)(6). Pub. L. 103–66, § 13174(a)(1), substituted ‘‘December 31, 1993’’ for ‘‘June 30, 1992’’. Subsec. (m). Pub. L. 103–66, § 13211(a), added subsec. (m). Former subsec. (m) redesignated (n). Subsec. (n). Pub. L. 103–66, § 13442(a), added subsec. (n). Former subsec. (n) redesignated (o). Pub. L. 103–66, § 13211(a), redesignated subsec. (m) as (n). Subsec. (o). Pub. L. 103–66, § 13442(a), redesignated sub- sec. (n) as (o). 1992—Subsec. (a). Pub. L. 102–486 inserted at end ‘‘For purposes of paragraph (2), the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year.’’ 1991—Subsec. (l)(6). Pub. L. 102–227 substituted ‘‘June 30, 1992’’ for ‘‘December 31, 1991’’. 1990—Subsec. (l)(3). Pub. L. 101–508, § 11111(d)(2), sub- stituted heading for one which read: ‘‘Coordination with medical deduction’’ and amended text generally. Prior to amendment, text read as follows: ‘‘Any amount paid by a taxpayer for insurance to which para- graph (1) applies shall not be taken into account in computing the amount allowable to the taxpayer as a deduction under section 213(a).’’ Subsec. (l)(6). Pub. L. 101–508, § 11410(a), substituted ‘‘December 31, 1991’’ for ‘‘September 30, 1990’’. 1989—Subsec. (i). Pub. L. 101–239, § 6202(b)(3)(A), struck out subsec. (i) which read as follows: ‘‘(1) COVERAGE RELATING TO END STAGE RENAL DIS- EASE.—The expenses paid or incurred by an employer for a group health plan shall not be allowed as a deduc- tion under this section if the plan differentiates in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner. Page 736 TITLE 26—INTERNAL REVENUE CODE § 162 ‘‘(2) GROUP HEALTH PLAN.—For purposes of this sub- section the term ‘group health plan’ means any plan of, or contributed to by, an employer to provide medical care (as defined in section 213(d) to his employees, former employees, or the families of such employees or former employees, directly or through insurance, reim- bursement, or otherwise.’’ Subsec. (k)(2)(B)(iv). Pub. L. 101–239, § 7862(c)(3)(A), amended cl. (iv) as it existed prior to repeal of subsec. (k) by Pub. L. 100–647, by substituting ‘‘entitlement’’ for ‘‘eligibility’’ in heading and inserting ‘‘which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary’’ after ‘‘or otherwise)’’ in subclause (I). Subsec. (l)(2). Pub. L. 101–140 redesignated subpar. (C) as (B) and struck out former subpar. (B) which read as follows: ‘‘REQUIRED COVERAGE.—Paragraph (1) shall not apply to any taxpayer for any taxable year unless cov- erage is provided under 1 or more plans meeting the re- quirements of section 89, treating such coverage as an employer-provided benefit.’’ Subsec. (l)(5). Pub. L. 101–239, § 7107(b), added par. (5). Former par. (5) redesignated (6). Pub. L. 101–239, § 7107(a)(1), substituted ‘‘September 30, 1990’’ for ‘‘December 31, 1989’’. Subsec. (l)(6). Pub. L. 101–239, § 7107(b), redesignated former par. (5) as (6). 1988—Subsec. (i)(2), (3). Pub. L. 100–647, § 3011(b)(2), re- designated par. (3) as (2) and struck out former par. (2) which required plans to provide continuation coverage to certain individuals. Subsec. (k). Pub. L. 100–647, § 3011(b)(3), redesignated subsec. (l), relating to stock redemption expenses, as (k) and struck out former subsec. (k) which related to continuation coverage requirements of group health plans. Subsec. (k)(5)(B). Pub. L. 100–647, § 1018(t)(7)(B), made amendment identical to Pub. L. 99–509, § 9307(c)(2)(B), which amended directory language of Pub. L. 99–514, § 1895(d)(5)(A), by substituting ‘‘section 162(k)(5)’’ for ‘‘section 162(k)(2)’’. See 1986 Amendment note below. Subsec. (l). Pub. L. 100–647, § 3011(b)(3)(A), (B), redesig- nated subsec. (m), relating to special rules for health insurance costs of self-employed individuals, as (l). Former subsec. (l), relating to stock redemption ex- penses, redesignated (k). Subsec. (m). Pub. L. 100–647, § 3011(b)(3)(B), (C), redes- ignated subsec. (n), relating to cross references, as (m). Former subsec. (m), relating to special rules for health insurance costs of self-employed individuals, redesig- nated (l). Pub. L. 100–647, § 1011B(b)(2), redesignated subsec. (m), relating to cross references, as (n). Subsec. (m)(2)(A). Pub. L. 100–647, § 1011B(b)(3), in- serted ‘‘derived by the taxpayer from the trade or busi- ness with respect to which the plan providing the med- ical care coverage is established’’ after ‘‘401(c))’’. Subsec. (m)(4), (5). Pub. L. 100–647, § 1011B(b)(1), added par. (4) and redesignated former par. (4) as (5). Subsec. (n). Pub. L. 100–647, § 3011(b)(3)(C), redesig- nated subsec. (n) as (m). Pub. L. 100–647, § 1011B(b)(2), redesignated subsec. (m), relating to cross references, as (n). 1986—Subsec. (i)(1). Pub. L. 99–272, § 10001(d), sub- stituted ‘‘Coverage relating to end stage renal disease’’ for ‘‘General rule’’ in heading. Subsec. (i)(2), (3). Pub. L. 99–272, § 10001(a), added par. (2) and redesignated former par. (2) as (3). Subsec. (k). Pub. L. 99–272, § 10001(c), added subsec. (k). Former subsec. (k) redesignated (l). Subsec. (k)(2)(A). Pub. L. 99–514, § 1895(d)(1)(A), in- serted ‘‘If coverage under the plan is modified for any group of similarly situated beneficiaries, the coverage shall also be modified in the same manner for all indi- viduals who are qualified beneficiaries under the plan pursuant to this subsection in connection with such group.’’ Subsec. (k)(2)(B)(i). Pub. L. 99–514, § 1895(d)(2)(A), sub- stituted ‘‘Maximum required period’’ for ‘‘Maximum period’’ in heading and amended text generally. Prior to amendment, text read as follows: ‘‘In the case of— ‘‘(I) a qualifying event described in paragraph (3)(B) (relating to terminations and reduced hours), the date which is 18 months after the date of the quali- fying event, and ‘‘(II) any qualifying event not described in sub- clause (I), the date which is 36 months after the date of the qualifying event.’’ Subsec. (k)(2)(B)(i)(II). Pub. L. 99–509, § 9501(b)(1)(A)(i), inserted ‘‘(other than a qualifying event described in paragraph (3)(F))’’. Subsec. (k)(2)(B)(i)(III), (IV). Pub. L. 99–509, § 9501(b)(1)(A)(ii)–(iv), added subcl. (III), redesignated former subcl. (III) as (IV), and inserted ‘‘or (3)(F)’’. Subsec. (k)(2)(B)(iii). Pub. L. 99–514, § 1895(d)(3)(A), in- serted ‘‘The payment of any premium (other than any payment referred to in the last sentence of subpara- graph (C)) shall be considered to be timely if made within 30 days after the date due or within such longer period as applies to or under the plan.’’ Subsec. (k)(2)(B)(iv). Pub. L. 99–514, § 1895(d)(4)(A)(iii), substituted ‘‘Group health plan coverage’’ for ‘‘Reem- ployment’’ in heading. Subsec. (k)(2)(B)(iv)(I). Pub. L. 99–514, § 1895(d)(4)(A)(ii), substituted ‘‘covered under any other group health plan (as an employee or otherwise)’’ for ‘‘a covered employee under any other group health plan’’. Subsec. (k)(2)(B)(iv)(II). Pub. L. 99–509, § 9501(b)(2)(A), inserted ‘‘in the case of a qualified beneficiary other than a qualified beneficiary described in paragraph (7)(B)(iv),’’. Subsec. (k)(2)(B)(v). Pub. L. 99–514, § 1895(d)(4)(A)(i), struck out cl. (v), remarriage of spouse, which read as follows: ‘‘In the case of an individual who is a qualified beneficiary by reason of being the spouse of a covered employee, the date on which the beneficiary remarries and becomes covered under a group health plan.’’ Subsec. (k)(3). Pub. L. 99–509, § 9501(a)(1), added sub- par. (F) and concluding provisions. Subsec. (k)(5)(B). Pub. L. 99–514, § 1895(d)(5)(A), as amended by Pub. L. 99–509, § 9307(c)(2)(B), and Pub. L. 100–647, § 1018(t)(7)(B), inserted ‘‘of continuation cov- erage’’ and ‘‘If there is a choice among types of cov- erage under the plan, each qualified beneficiary is enti- tled to make a separate selection among such types of coverage.’’ See 1988 Amendment note above. Subsec. (k)(6)(B). Pub. L. 99–509, § 9501(d)(1), sub- stituted ‘‘(D), or (F)’’ for ‘‘or (D)’’. Subsec. (k)(6)(C). Pub. L. 99–514, § 1895(d)(6)(A), in- serted ‘‘within 60 days after the date of the qualifying event’’. Subsec. (k)(6)(D)(i). Pub. L. 99–509, § 9501(d)(1), sub- stituted ‘‘(D), or (F)’’ for ‘‘or (D)’’. Subsec. (k)(7)(B)(iii). Pub. L. 99–514, § 1895(d)(7), added cl. (iii). Subsec. (k)(7)(B)(iv). Pub. L. 99–509, § 9501(c)(1), added cl. (iv). Subsec. (l). Pub. L. 99–514, § 613(a), added subsec. (l). Former subsec. (l) redesignated (m). Pub. L. 99–272, § 10001(c), redesignated former subsec. (k), relating to cross references, as (l). Subsec. (m). Pub. L. 99–514, § 1161(a), added subsec. (m) relating to special rules for health insurance costs of self-employed individuals, and further directed that this section be amended ‘‘by redesignating subsection (n) as subsection (m)’’, which directory language could not be executed because this section does not contain a subsec. (n). Pub. L. 99–514, § 613(a), redesignated subsec. (l), relat- ing to cross references, as (m). 1984—Subsec. (i)(2). Pub. L. 98–369, § 2354(d), sub- stituted ‘‘section 213(d)’’ for ‘‘section 213(e)’’. Subsec. (j). Pub. L. 98–573 added subsec. (j). Former subsec. (j) redesignated (k). Subsec. (j)(3). Pub. L. 98–369, § 512(b), added par. (3). Subsec. (k). Pub. L. 98–573 redesignated former sub- sec. (j) as (k). 1982—Subsec. (a). Pub. L. 97–216 inserted provisions under which amounts expended by Members of Congress within each taxable year for living expenses shall not be deductible for income tax purposes in excess of $3,000. Page 737 TITLE 26—INTERNAL REVENUE CODE § 162 Subsec. (c)(1). Pub. L. 97–248, § 288(a), substituted ‘‘is unlawful under the Foreign Corrupt Practices Act of 1977’’ for ‘‘would be unlawful under the laws of the United States if such laws were applicable to such pay- ment and to such official or employee’’ after ‘‘govern- ment, the payment’’, and ‘‘(or is unlawful under the Foreign Corrupt Practices Act of 1977)’’ for ‘‘(or would be unlawful under the laws of the United States)’’ be- fore ‘‘shall be upon the Secretary’’. Subsec. (h). Pub. L. 97–248, § 128(b)(2), redesignated subsec. (i), relating to State legislators’ travel expenses away from home, as (h). Former subsec. (h), relating to group health plans, redesignated (i). Subsec. (i). Pub. L. 97–248, § 128(b)(2), redesignated former subsec. (h), relating to group health plans, as (i). Former subsec. (i), relating to State legislators’ travel expenses away from home, redesignated (h). Former subsec. (i), relating to cross references, redesig- nated (j). Subsec. (j). Pub. L. 97–248, § 128(b)(1), redesignated former subsec. (i), relating to cross references, as (j). 1981—Subsec. (a). Pub L. 97–51 struck out provisions under which amounts expended by Members of Congress within each taxable year for living expenses could not be deductible for income tax purposes in excess of $3,000. Subsec. (h). Pub. L. 97–35 added subsec. (h) relating to group health plans. Former subsec. (h), as added by Pub. L. 97–34 and relating to State legislators’ travel expenses away from home, redesignated (i). See 1982 Amendment note above. Pub. L. 97–34 added subsec. (h) relating to State legis- lators’ travel expenses away from home. Former sub- sec. (h), relating to cross references, redesignated (i). See 1982 Amendment note above. Subsec. (i). Pub. L. 97–35 redesignated former subsec. (h), as added by Pub. L. 97–34 and relating to State leg- islators’ travel expenses away from home, as (i). See 1982 Amendment note above. Pub. L. 97–34 redesignated former subsec. (h), relating to cross references, as (i). See 1982 Amendment note above. 1976—Subsec. (a). Pub. L. 94–455, § 1901(c)(4), struck out reference to Territory in provisions following par. (3). Subsec. (c). Pub. L. 94–455, § 1906(b)(13)(A), struck out in pars. (1) and (2) ‘‘or his delegate’’ after ‘‘Secretary’’. 1971—Subsec. (c). Pub. L. 92–178, § 310(a)(2), sub- stituted ‘‘Illegal bribes, kickbacks, and other pay- ments’’ for ‘‘Bribes and illegal kickbacks’’ in heading. Subsec. (c)(2). Pub. L. 92–178, § 310(a)(1), substituted provisions respecting ‘‘Other illegal payments’’ for former provisions on ‘‘Other bribes or kickbacks’’ read- ing ‘‘If in a criminal proceeding a taxpayer is convicted of making a payment (other than a payment described in paragraph (1) which is an illegal bribe or kickback, or his plea of guilty or nolo contendere to an indict- ment or information charging the making of such a payment is entered or accepted in such a proceeding, no deduction shall be allowed under subsection (a) on ac- count of such payment or any related payment made prior to the date of the final judgment in such pro- ceeding.’’ Subsec. (c)(3). Pub. L. 92–178, § 310(a)(1), substituted provisions respecting kickbacks, rebates, and bribes under medicare and medicaid for former statute of lim- itations provisions. 1969—Subsec. (c). Pub. L. 91–172, § 902(b), designated existing provisions as par. (1), extended the applica- bility of nondeductible expenses for payments to any official or employee of any government, or of any agen- cy or instrumentality of any government, and added pars. (2) and (3). Subsecs. (f), (g). Pub. L. 91–172, § 902(a), added subsecs. (f) and (g). Former subsec. (f) redesignated (h). Subsec. (h). Pub. L. 91–172, §§ 516(c)(2)(A), 902(a), redes- ignated former subsec. (f) as (h), substituted ‘‘(1) For’’ for ‘‘For’’, and inserted reference to section 1253 for special rule relating to the treatment of payments by a transferee of a franchise, trademark, or trade name. 1962—Subsec. (a)(2). Pub. L. 87–834, § 4(b), substituted ‘‘(including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances)’’ for ‘‘including the entire amount expended for meals and lodging)’’. Subsecs. (e), (f). Pub. L. 87–834, § 3(a), added subsec. (e) and redesignated former subsec. (e) as (f). 1960—Subsec. (b). Pub. L. 86–779, § 7(b), inserted ‘‘the dollar limitations,’’ after ‘‘the percentage limita- tions,’’. Subsecs. (d), (e). Pub. L. 86–779, § 8(a), added subsec. (d) and redesignated former subsec. (d) as (e). 1958—Subsecs. (c), (d). Pub. L. 85–866, § 5(a), added sub- sec. (c) and redesignated former subsec. (c) as (d). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Amendment by section 11002(d)(6) of Pub. L. 115–97 ap- plicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title. Pub. L. 115–97, title I, § 13306(a)(2), Dec. 22, 2017, 131 Stat. 2127, provided that: ‘‘The amendment made by this subsection [amending this section] shall apply to amounts paid or incurred on or after the date of the en- actment of this Act [Dec. 22, 2017], except that such amendments shall not apply to amounts paid or in- curred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.’’ Pub. L. 115–97, title I, § 13307(b), Dec. 22, 2017, 131 Stat. 2129, provided that: ‘‘The amendments made by this section [amending this section] shall apply to amounts paid or incurred after the date of the enactment of this Act [Dec. 22, 2017].’’ Pub. L. 115–97, title I, § 13308(c), Dec. 22, 2017, 131 Stat. 2129, provided that: ‘‘The amendments made by this section [amending this section and section 6033 of this title] shall apply to amounts paid or incurred on or after the date of the enactment of this Act [Dec. 22, 2017].’’ Pub. L. 115–97, title I, § 13311(b), Dec. 22, 2017, 131 Stat. 2132, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 22, 2017].’’ Pub. L. 115–97, title I, § 13531(b), Dec. 22, 2017, 131 Stat. 2154, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.’’ Pub. L. 115–97, title I, § 13601(e), Dec. 22, 2017, 131 Stat. 2156, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017. ‘‘(2) EXCEPTION FOR BINDING CONTRACTS.—The amend- ments made by this section shall not apply to remu- neration which is provided pursuant to a written bind- ing contract which was in effect on November 2, 2017, and which was not modified in any material respect on or after such date.’’ EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2011 AMENDMENT Amendment by Pub. L. 112–10 effective as if included in the provisions of, and the amendments made by, the provisions of Pub. L. 111–148 to which it relates, see sec- tion 1858(d) of Pub. L. 112–10, set out as a note under section 36B of this title. EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–240, title II, § 2042(b), Sept. 27, 2010, 124 Stat. 2560, provided that: ‘‘The amendments made by Page 738 TITLE 26—INTERNAL REVENUE CODE § 162 this section [amending this section] shall apply to tax- able years beginning after December 31, 2009.’’ Pub. L. 111–148, title IX, § 9014(b), Mar. 23, 2010, 124 Stat. 870, provided that: ‘‘The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009, with respect to services performed after such date.’’ Pub. L. 111–148, title X, § 10108(g)(2), Mar. 23, 2010, 124 Stat. 914, provided that: ‘‘The amendments made by this subsection [amending this section] shall apply to vouchers provided after December 31, 2013.’’ EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–343, div. A, title III, § 302(c)(1), Oct. 3, 2008, 122 Stat. 3806, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to taxable years ending on or after the date of the enact- ment of this Act [Oct. 3, 2008].’’ EFFECTIVE DATE OF 2004 AMENDMENT Pub. L. 108–357, title III, § 318(c), Oct. 22, 2004, 118 Stat. 1470, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2003.’’ Amendment by section 802(b)(2) of Pub. L. 108–357 ef- fective Mar. 4, 2003, see section 802(d) of Pub. L. 108–357, set out as an Effective Date note under section 4985 of this title. EFFECTIVE DATE OF 2003 AMENDMENT Amendment by Pub. L. 108–121 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2002, see section 109(c) of Pub. L. 108–121, set out as a note under section 62 of this title. EFFECTIVE DATE OF 1998 AMENDMENTS Pub. L. 105–277, div. J, title II, § 2002(b), Oct. 21, 1998, 112 Stat. 2681–901, provided that: ‘‘The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1998.’’ Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title IX, § 934(b), Aug. 5, 1997, 111 Stat. 882, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1996.’’ Pub. L. 105–34, title XII, § 1203(c), Aug. 5, 1997, 111 Stat. 995, provided that: ‘‘The amendments made by this section [amending this section and repealing provi- sions set out as a note below] shall apply to taxable years beginning after December 31, 1997.’’ Pub. L. 105–34, title XII, § 1204(b), Aug. 5, 1997, 111 Stat. 995, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to amounts paid or incurred with respect to taxable years ending after the date of the enactment of this Act [Aug. 5, 1997].’’ Amendment by section 1602(c) of Pub. L. 105–34 effec- tive as if included in the provisions of the Health Insur- ance Portability and Accountability Act of 1996, Pub. L. 104–191, to which such amendment relates, see sec- tion 1602(i) of Pub. L. 105–34, set out as a note under section 26 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 311(a) of Pub. L. 104–191 appli- cable to taxable years beginning after Dec. 31, 1996, see section 311(c) of Pub. L. 104–191, set out as a note under section 104 of this title. Pub. L. 104–191, title III, § 322(c), Aug. 21, 1996, 110 Stat. 2062, provided that: ‘‘The amendments made by this section [amending this section and section 213 of this title] shall apply to taxable years beginning after December 31, 1996.’’ Pub. L. 104–188, title I, § 1704(p)(4), Aug. 20, 1996, 110 Stat. 1886, provided that: ‘‘(A) IN GENERAL.—Except as provided in subpara- graph (B), the amendments made by this subsection [amending this section] shall apply to amounts paid or incurred after September 13, 1995, in taxable years end- ing after such date. ‘‘(B) PARAGRAPH (2).—The amendment made by para- graph (2) [amending this section] shall take effect as if included in the amendment made by section 613 of the Tax Reform Act of 1986 [Pub. L. 99–514].’’ EFFECTIVE DATE OF 1995 AMENDMENT Pub. L. 104–7, § 1(c), Apr. 11, 1995, 109 Stat. 93, provided that: ‘‘(1) EXTENSION.—The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1993. ‘‘(2) INCREASE.—The amendment made by subsection (b) [amending this section] shall apply to taxable years beginning after December 31, 1994.’’ EFFECTIVE DATE OF 1993 AMENDMENT Amendment by section 13131(d)(2) of Pub. L. 103–66 ap- plicable to taxable years beginning after Dec. 31, 1993, see section 13131(e) of Pub. L. 103–66, set out as a note under section 32 of this title. Pub. L. 103–66, title XIII, § 13174(a)(3), Aug. 10, 1993, 107 Stat. 457, provided that: ‘‘The amendments made by this subsection [amending this section and repealing provisions set out below] shall apply to taxable years ending after June 30, 1992.’’ Pub. L. 103–66, title XIII, § 13174(b)(2), Aug. 10, 1993, 107 Stat. 457, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1992.’’ Pub. L. 103–66, title XIII, § 13211(b), Aug. 10, 1993, 107 Stat. 471, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to amounts which would otherwise be deductible for tax- able years beginning on or after January 1, 1994.’’ Pub. L. 103–66, title XIII, § 13222(e), Aug. 10, 1993, 107 Stat. 481, provided that: ‘‘The amendments made by this section [amending this section and sections 170, 6033, and 7871 of this title] shall apply to amounts paid or incurred after December 31, 1993.’’ Pub. L. 103–66, title XIII, § 13442(b), Aug. 10, 1993, 107 Stat. 568, as amended by Pub. L. 104–7, § 5, Apr. 11, 1995, 109 Stat. 96, provided that: ‘‘The provisions of this sec- tion [amending this section] shall apply to services pro- vided after February 2, 1993, and on or before December 31, 1995.’’ EFFECTIVE DATE OF 1992 AMENDMENT Pub. L. 102–486, title XIX, § 1938(b), Oct. 24, 1992, 106 Stat. 3033, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to costs paid or incurred after December 31, 1992.’’ EFFECTIVE DATE OF 1991 AMENDMENT Pub. L. 102–227, title I, § 110(b), Dec. 11, 1991, 105 Stat. 1688, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1991.’’ EFFECTIVE DATE OF 1990 AMENDMENT Amendment by section 11111(d)(2) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11111(f) of Pub. L. 101–508, set out as a note under section 32 of this title. Pub. L. 101–508, title XI, § 11410(c), Nov. 5, 1990, 104 Stat. 1388–479, provided that: ‘‘The amendments made by this section [amending this section and repealing provisions set out below] shall apply to taxable years beginning after December 31, 1989.’’ EFFECTIVE DATE OF 1989 AMENDMENT Pub. L. 101–239, title VI, § 6202(b)(5), Dec. 19, 1989, 103 Stat. 2233, provided that: ‘‘The amendments made by Page 739 TITLE 26—INTERNAL REVENUE CODE § 162 this subsection [amending this section, sections 4980B and 5000 of this title, sections 623 and 631 of Title 29, Labor, and sections 1395p, 1395r, and 1395y of Title 42, The Public Health and Welfare] shall apply to items and services furnished after the date of the enactment of this Act [Dec. 19, 1989].’’ Pub. L. 101–239, title VII, § 7107(c), Dec. 19, 1989, 103 Stat. 2306, provided that: ‘‘The amendments made by this section [amending this section] shall apply to tax- able years beginning after December 31, 1989.’’ Pub. L. 101–239, title VII, § 7862(c)(3)(D), Dec. 19, 1989, 103 Stat. 2432, provided that: ‘‘The amendments made by this paragraph [amending this section, section 4980B of this title, and section 1162 of Title 29, Labor] shall apply to— ‘‘(i) qualifying events occurring after December 31, 1989, and ‘‘(ii) in the case of qualified beneficiaries who elect- ed continuation coverage after December 31, 1988, the period for which the required premium was paid (or was attempted to be paid but was rejected as such).’’ 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 sections 1011B(b)(1)–(3) and 1018(t)(7)(B) of Pub. L. 100–647 effective, except as other- wise provided, as if included 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. Pub. L. 100–647, title III, § 3011(d), Nov. 10, 1988, 102 Stat. 3625, provided that: ‘‘The amendments made by this section [enacting section 4980B of this title, and amending this section, sections 106 and 414 of this title, section 1167 of Title 29, Labor, and section 300bb–8 of Title 42, The Public Health and Welfare] shall apply to taxable years beginning after December 31, 1988, but shall not apply to any plan for any plan year to which section 162(k) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act [Nov. 10, 1988]) did not apply by reason of sec- tion 10001(e)(2) of the Consolidated Omnibus Budget Reconciliation Act of 1985 [section 10001(e)(2) of Pub. L. 99–272, set out as an Effective Date of 1986 Amendment note under section 106 of this title].’’ EFFECTIVE DATE OF 1986 AMENDMENT Pub. L. 99–514, title VI, § 613(b), Oct. 22, 1986, 100 Stat. 2251, provided that: ‘‘The amendments made by sub- section (a) [amending this section] shall apply to any amount paid or incurred after February 28, 1986, in tax- able years ending after such date.’’ Pub. L. 99–514, title XI, § 1161(b), Oct. 22, 1986, 100 Stat. 2509, provided that: ‘‘(1) IN GENERAL.—The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1986. ‘‘(2) TRANSITIONAL RULE.—In the case of any year to which section 89 of the Internal Revenue Code of 1986 does not apply, [former] section 162(m)(2)(B) of such Code shall be applied by substituting any non- discrimination requirements otherwise applicable for the requirements of section 89 of such Code. ‘‘(3) ASSISTANCE.—The Secretary of the Treasury or his delegate shall provide guidance to self-employed in- dividuals to assist them in meeting the requirements of section 89 of the Internal Revenue Code of 1986 with re- spect to coverage required by the amendments made by this section [amending this section].’’ Pub. L. 99–514, title XVIII, § 1895(d)(6)(D), Oct. 22, 1986, 100 Stat. 2939, provided that: ‘‘The amendments made by this paragraph [amending this section, section 1166 of Title 29, Labor, and section 300bb–6 of Title 42, The Public Health and Welfare] shall only apply with re- spect to qualifying events occurring after the date of the enactment of this Act [Oct. 22, 1986].’’ Pub. L. 99–514, title XVIII, § 1895(e), Oct. 22, 1986, 100 Stat. 2940, provided that: ‘‘Except as otherwise provided in this section, the amendments made by this section [amending this section, section 3121 of this title, sec- tions 1162 and 1165 to 1167 of Title 29, Labor, sections 300bb–2, 300bb–5, 300bb–6, 410, 1301, 1320c–13, 1395p, 1395u, 1395cc, 1395dd, 1395mm, 1395ww, 1395yy, 1396a, 1396b, 1396d, and 1396s of Title 42, The Public Health and Wel- fare, enacting provisions set out as notes under this section, section 3121 of this title, section 1167 of Title 29, and sections 1395u, 1395y, 1395ww, and 1395yy of Title 42, and amending provisions set out as notes under sec- tions 403, 1395u, 1395cc, 1395mm, 1395ww, 1395yy, and 1396b of Title 42] shall be effective as if included in the enactment of the Consolidated Omnibus Budget Rec- onciliation Act of 1985 [Pub. L. 99–272].’’ Amendment by section 9307(c)(2)(B) of Pub. L. 99–509 effective as if included in the enactment of Tax Reform Act of 1986, Pub. L. 99–514, see section 9307(c)(2) of Pub. L. 99–509, set out as a note under section 1395u of Title 42, The Public Health and Welfare. Pub. L. 99–509, title IX, § 9501(e), Oct. 21, 1986, 100 Stat. 2078, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section and sections 1162, 1163, 1166, and 1167 of Title 29, Labor] shall take effect as if in- cluded in title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 [sections 10001 to 10003 of Pub. L. 99–272]. ‘‘(2) TREATMENT OF CERTAIN BANKRUPTCY PRO- CEEDINGS.—Notwithstanding paragraph (1), section 10001(e) of the Consolidated Omnibus Budget Reconcili- ation Act of 1985 [set out as a note under section 106 of this title], and section 10002(d) of such Act [set out as a note under section 1161 of Title 29], the amendments made by this section [amending this section and sec- tions 1162, 1163, 1166, and 1167 of Title 29] and by sec- tions 10001 and 10002 of such Act [enacting sections 1161 to 1168 of Title 29, amending this section, section 106 of this title, and section 1132 of Title 29, and enacting pro- visions set out as notes under section 106 of this title and sections 1161 and 1166 of Title 29] shall apply in the case of plan years ending during the 12-month period beginning July 1, 1986, but only with respect to— ‘‘(A) a qualifying event described in section 162(k)(3)(F) of the Internal Revenue Code of 1986 or section 603(6) of the Employee Retirement Income Se- curity Act of 1974 [29 U.S.C. 1163(6)], and ‘‘(B) a qualifying event described in section 162(k)(3)(A) of the Internal Revenue Code of 1986 or section 603(1) of the Employee Retirement Income Se- curity Act of 1974 [29 U.S.C. 1163(1)] relating to the death of a retired employee occurring after the date of the qualifying event described in subparagraph (A). ‘‘(3) TREATMENT OF CURRENT RETIREES.—Section 162(k)(3)(F) of the Internal Revenue Code of 1986 and section 603(6) of the Employee Retirement Income Se- curity Act of 1974 [29 U.S.C. 1163(6)] apply to covered employees who retired before, on, or after the date of the enactment of this Act [Oct. 21, 1986]. ‘‘(4) NOTICE.—In the case of a qualifying event de- scribed in section 603(6) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1163(6)] that oc- curred before the date of the enactment of this Act [Oct. 21, 1986], the notice required under section 606(2) of such Act [29 U.S.C. 1166(2)] (and under section 162(k)(6)(B) of the Internal Revenue Code of 1986) with respect to such event shall be provided no later than 30 days after the date of the enactment of this Act [Oct. 21, 1986].’’ Amendment by Pub. L. 99–272 applicable to plan years beginning on or after July 1, 1986, with special rule for collective bargaining agreements, see section 10001(e) of Pub. L. 99–272, set out as a note under section 106 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–573, title II, § 232(b), Oct. 30, 1984, 98 Stat. 2991, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to tax- Page 740 TITLE 26—INTERNAL REVENUE CODE § 162 able years beginning after the date of the enactment of this Act [Oct. 30, 1984].’’ Amendment by section 512(b) of Pub. L. 98–369 appli- cable to amounts paid or incurred after July 18, 1984, in taxable years ending after such date, subject to an ex- ception for certain extended vacation pay plans, see section 512(c) of Pub. L. 98–369, set out as a note under section 404 of this title. Amendment by section 2354(d) of Pub. L. 98–369 effec- tive July 18, 1984, but not to be construed as changing or affecting any right, liability, status, or interpreta- tion which existed (under the provisions of law in- volved) before that date, see section 2354(e) of Pub. L. 98–369, set out as a note under section 1320a–1 of Title 42, The Public Health and Welfare. EFFECTIVE DATE OF 1982 AMENDMENT Pub. L. 97–248, title II, § 288(c), Sept. 3, 1982, 96 Stat. 571, provided that: ‘‘The amendments made by this sec- tion [amending this section and sections 952 and 964 of this title] shall apply to payments made after the date of the enactment of this Act [Sept. 3, 1982].’’ Amendment by section 128(b) of Pub. L. 97–248 effec- tive as if such amendment had been originally included as part of this section as this section was amended by the Omnibus Budget Reconciliation Act of 1981, Pub. L. 97–35, see section 128(e)(2) of Pub. L. 97–248, set out as a note under section 1395x of Title 42, The Public Health and Welfare. Pub. L. 97–216, title II, § 215(d), July 18, 1982, 96 Stat. 194, provided that: ‘‘The amendments made by this sec- tion [amending this section and section 280A of this title and repealing provisions set out as a note under this section] shall apply to taxable years beginning after December 31, 1981.’’ EFFECTIVE DATE OF 1981 AMENDMENT Pub. L. 97–51, § 139(b)(3), Oct. 1, 1981, 95 Stat. 967, as amended by Pub. L. 97–92, § 133a, Dec. 15, 1981, 95 Stat. 1199, provided that: ‘‘The amendments made by this subsection [amending this section and repealing sec- tion 31c of Title 2, The Congress] shall apply to taxable years beginning after December 31, 1980.’’ Pub. L. 97–35, title XXI, § 2146(c)(2), Aug. 13, 1981, 95 Stat. 801, provided that: ‘‘The amendments made by subsection (b) [amending this section] shall be effective with respect to taxable years beginning on or after Jan- uary 1, 1982.’’ Pub. L. 97–34, title I, § 127(b), Aug. 13, 1981, 95 Stat. 203, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to taxable years be- ginning on or after January 1, 1976.’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1901(c)(4) of Pub. L. 94–455 ap- plicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1971 AMENDMENT Pub. L. 92–178, title III, § 310(b), Dec. 10, 1971, 85 Stat. 525, provided that: ‘‘The amendments made by sub- section (a) [amending this section] shall apply with re- spect to payments after December 30, 1969, except that section 162(c)(3) of the Internal Revenue Act of 1954 (as added by subsection (a)) shall apply only with respect to kickbacks, rebates, and bribes payment of which is made on or after the date of the enactment of this Act [Dec. 10, 1971].’’ EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title IX, § 902(c), Dec. 30, 1969, 83 Stat. 711, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘Section 162(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)) shall apply to all taxable years to which such Code applies. Section 162(g) of such Code (as added by subsection (a)) shall apply with respect to amounts paid or incurred after December 31, 1969. Section 162(c)(1) of such Code (as amended by subsection (b)) shall apply to all taxable years to which such Code ap- plies. Sections 162(c)(2) and (3) of such Code (as amend- ed by subsection (b)) shall apply with respect to pay- ments made after the date of the enactment of this Act [Dec. 30, 1969].’’ Amendment by section 516(c)(2)(A) of Pub. L. 91–172 applicable to transfers after Dec. 31, 1969, see section 516(d)(3) of Pub. L. 91–172, set out as a note under sec- tion 1001 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Pub. L. 87–834, § 4(c), Oct. 16, 1962, 76 Stat. 977, pro- vided that: ‘‘The amendments made by this section [amending this section and enacting section 274 of this title] shall apply with respect to taxable years ending after December 31, 1962, but only in respect of periods after such date.’’ Pub. L. 87–834, § 3(b), Oct. 16, 1962, 76 Stat. 973, pro- vided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years be- ginning after December 31, 1962.’’ EFFECTIVE DATE OF 1960 AMENDMENT Pub. L. 86–779, § 7(c), Sept. 14, 1960, 74 Stat. 1002, pro- vided that: ‘‘The amendments made by subsections (a) and (b) [amending this section and section 170 of this title] shall apply with respect to taxable years begin- ning after December 31, 1959.’’ Pub. L. 86–779, § 8(d), Sept. 14, 1960, 74 Stat. 1003, pro- vided that: ‘‘The amendments made by subsections (a), (b), and (c) [amending this section and section 1054 of this title and amending table of sections for Part IV by adding item 1054 and numbering former item 1054 as 1055] shall apply with respect to taxable years begin- ning after December 31, 1959.’’ EFFECTIVE DATE OF 1958 AMENDMENT Pub. L. 85–866, title I, § 5(b), Sept. 2, 1958, 72 Stat. 1608, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply only with respect to expenses paid or incurred after the date of the enact- ment of this Act [Sept. 2, 1958]. The determination as to whether any expense paid or incurred on or before the date of the enactment of this Act shall be allowed as a deduction shall be made as if this section had not been enacted and without inference drawn from the fact that this section is not made applicable with re- spect to expenses paid or incurred on or before the date of the enactment of this Act.’’ DEDUCTION FOR SPECIAL ASSESSMENTS Pub. L. 104–208, div. A, title II, § 2711, Sept. 30, 1996, 110 Stat. 3009–498, provided that, for purposes of subtitle A of this title, the amount allowed as a deduction under this section for a taxable year would include any amount paid during that year by reason of an assess- ment under section 2702 of Pub. L. 104–208, formerly set out as a note under section 1817 of Title 12, Banks and Banking, and that former section 172(f) of this title would not apply to that deduction. SPECIAL RULE FOR DEDUCTIONS UNDER SUBSECTION (l) FOR CERTAIN TAXABLE YEARS Pub. L. 102–227, title I, § 110(a)(2), Dec. 11, 1991, 105 Stat. 1688, provided that, in the case of any taxable year beginning in 1992 only amounts paid before July 1, 1992, by the individual for insurance coverage for peri- ods before July 1, 1992, would be taken into account in determining the amount deductible under subsec. (l) of this section with respect to such individual for such taxable year, and that for purposes of subparagraph (A) of subsec. (l)(2) of this section, the amount of the earned income described in such subparagraph taken into account for such taxable year would be the amount which bears the same ratio to the total amount of such earned income as the number of months in such taxable year ending before July 1, 1992, bears to the number of months in such taxable year, prior to repeal Page 741 TITLE 26—INTERNAL REVENUE CODE § 163 by Pub. L. 103–66, title XIII, § 13174(a)(2), Aug. 10, 1993, 107 Stat. 457. Pub. L. 101–239, title VII, § 7107(a)(2), Dec. 19, 1989, 103 Stat. 2306, provided that, in the case of any taxable year beginning in 1990 only amounts paid before Oct. 1, 1990, by the individual for insurance coverage for peri- ods before Oct. 1, 1990, would be taken into account in determining the amount deductible under subsec. (l) of this section with respect to such individual for such taxable year, and that for purposes of subsec. (l)(2)(A) of this section, the amount of the earned income de- scribed in such paragraph taken into account for such taxable year would be the amount which bears the same ratio to the total amount of such earned income as the number of months in such taxable year ending before Oct. 1, 1990, bears to the number of months in such taxable year, prior to repeal by Pub. L. 101–508, title XI, § 11410(b), Nov. 5, 1990, 104 Stat. 1388–479. BUSINESS USE OF AUTOMOBILES BY RURAL MAIL CARRIERS Pub. L. 100–647, title VI, § 6008, Nov. 10, 1988, 102 Stat. 3687, provided that in the case of any employee of the United States Postal Service who performed services involving the collection and delivery of mail on a rural route, such employee was permitted to compute the amount allowable as a deduction under this chapter for the use of an automobile in performing such services by using a standard mileage rate for all miles of such use equal to 150 percent of the basic standard rate, prior to repeal by Pub. L. 105–34, title XII, § 1203(b), Aug. 5, 1997, 111 Stat. 995. See subsec. (o) of this section. 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. LIVING EXPENSES OF MEMBERS OF CONGRESS WHILE AWAY FROM HOME; SENSE OF CONGRESS Pub. L. 97–51, § 139(a), Oct. 1, 1981, 95 Stat. 967, which expressed the sense of Congress that the dollar limits on tax deductions for living expenses of Members of Congress while away from home be the same as such limits for businessmen and other private citizens, was repealed by Pub. L. 97–216, title II, § 215(c), July 18, 1982, 96 Stat. 194. STATE LEGISLATORS’ TRAVEL EXPENSES AWAY FROM HOME Pub. L. 94–455, title VI, § 604, Oct. 4, 1976, 90 Stat. 1575, as amended by Pub. L. 95–30, title III, § 307, May 23, 1977, 91 Stat. 153; Pub. L. 95–258, § 2, Apr. 7, 1978, 92 Stat. 195; Pub. L. 96–167, § 3, Dec. 29, 1979, 93 Stat. 1275; Pub. L. 96–178, § 1, Jan. 2, 1980, 93 Stat. 1295; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(a) In GENERAL.—For purposes of section 162(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], in the case of any individual who was a State legislator at any time during any taxable year beginning before January 1, 1981, and who, for the taxable year, elects the application of this section, for any period during such a taxable year in which he was a State legislator— ‘‘(1) the place of residence of such individual within the legislative district which he represented shall be considered his home, and ‘‘(2) he shall be deemed to have expended for living expenses (in connection with his trade or business as a legislator) an amount equal to the sum of the amounts determined by multiplying each legislative day of such individual during the taxable year by the amount generally allowable with respect to such day to employees of the executive branch of the Federal Government for per diem while away from home but serving in the United States. ‘‘(b) LEGISLATIVE DAYS.—For purposes of subsection (a), a legislative day during any taxable year for any individual shall be any day during such year on which (1) the legislature was in session (including any day in which the legislature was not in session for a period of 4 consecutive days or less), or (2) the legislature was not in session but the physical presence of the indi- vidual was formally recorded at a meeting of a com- mittee of such legislature. ‘‘(c) LIMITATION.—The amount taken into account as living expenses attributable to a trade or business as a State legislator for any taxable year beginning before January 1, 1976, under an election made under this sec- tion shall not exceed the amount claimed for such pur- pose under a return (or amended return) filed before May 21, 1976. ‘‘(d) MAKING AND EFFECT OF ELECTION.—An election under this section shall be made at such time and in such manner as the Secretary of the Treasury or his delegate shall by regulations prescribe.’’ [Amendment of section 604 of Pub. L. 94–455 by sec- tion 1 of Pub. L. 96–178, which purported to substitute ‘‘January 1, 1979’’ for ‘‘January 1, 1978’’, was not exe- cuted because of the prior amendment by section 3(a)(2), (b) of Pub. L. 96–167 which substituted ‘‘January 1, 1981’’ for ‘‘January 1, 1978’’ in subsec. (a) and which struck out the last sentence of subsec. (d).] DENIAL OF DEDUCTION FOR AMOUNTS PAID OR IN- CURRED ON JUDGMENTS IN SUITS BROUGHT TO RE- COVER PRICE INCREASES IN PURCHASE OF NEW PRIN- CIPAL RESIDENCE No deductions to be allowed in computing taxable in- come for two-thirds of any amount paid or incurred on a judgment entered against any person in a suit brought under section 208(b) of Pub. L. 94–12, see sec- tion 208(c) of Pub. L. 94–12, title II, Mar. 29, 1975, 89 Stat. 35, set out as a note under section 44 of this title. DEDUCTIBILITY OF ACCRUED VACATION PAY Pub. L. 85–866, title I, § 97, Sept. 2, 1958, 72 Stat. 1672, as amended by Pub. L. 86–496, § 2, June 8, 1960, 74 Stat. 164; Pub. L. 88–153, Oct. 17, 1963, 77 Stat. 272; Pub. L. 88–554, § 1, Aug. 31, 1964, 78 Stat. 761; Pub. L. 89–692, Oct. 15, 1966, 80 Stat. 1025; Pub. L. 91–172, title IX, § 903, Dec. 30, 1969, 83 Stat. 711; Pub. L. 92–580, § 3, Oct. 27, 1972, 86 Stat. 1276, provided that deductions for accrued vaca- tion pay under this section would not be denied for any taxable year ending before Jan. 1, 1973, so long as the employee at the time of accrual of pay has performed the necessary qualifying service under an appropriate plan. INVESTIGATION OF, AND REPORTS ON, TREATMENT OF ENTERTAINMENT AND CERTAIN OTHER EXPENSES Pub. L. 86–564, title III, § 301, June 30, 1960, 74 Stat. 291, authorized the Joint Committee on Internal Rev- enue Taxation to investigate and report on the use of entertainment and certain other expense deductions to the 87th Congress and authorized the Secretary of the Treasury to report to the 87th Congress on the enforce- ment program of the Internal Revenue Service relating to such deductions. FILING OF CLAIMS FOR REFUNDS OF OVERPAYMENTS Extension of time for filing of claims for refunds or credit of overpayments of income tax resulting from application of this section, see section 96 of Pub. L. 85–866, set out as a note under section 6511 of this title. § 163. Interest (a) General rule There shall be allowed as a deduction all inter- est paid or accrued within the taxable year on indebtedness.