For purposes of the tax determined under section
(1) Interest determined using underpayment rates
The interest charge determined under this section with respect to any distribution is the amount of interest which would be determined on the partial tax computed under section
667(b) for the period described in paragraph (2) using the rates and the method under section
6621 applicable to underpayments of tax.
For purposes of paragraph (1), the period described in this paragraph is the period which begins on the date which is the applicable number of years before the date of the distribution and which ends on the date of the distribution.
(3) Applicable number of years
For purposes of paragraph (2)—
(A) In general
The applicable number of years with respect to a distribution is the number determined by dividing—
(i)the sum of the products described in subparagraph (B) with respect to each undistributed income year, by
(ii)the aggregate undistributed net income.
The quotient determined under the preceding sentence shall be rounded under procedures prescribed by the Secretary.
(B) Product described
For purposes of subparagraph (A), the product described in this subparagraph with respect to any undistributed income year is the product of—
(i)the undistributed net income for such year, and
(ii)the sum of the number of taxable years between such year and the taxable year of the distribution (counting in each case the undistributed income year but not counting the taxable year of the distribution).
(4) Undistributed income year
For purposes of this subsection, the term “undistributed income year” means any prior taxable year of the trust for which there is undistributed net income, other than a taxable year during all of which the beneficiary receiving the distribution was not a citizen or resident of the United States.
(5) Determination of undistributed net income
666, for purposes of this subsection, an accumulation distribution from the trust shall be treated as reducing proportionately the undistributed net income for undistributed income years.
(6) Periods before 1996
Interest for the portion of the period described in paragraph (2) which occurs before January 1, 1996, shall be determined—
(A)by using an interest rate of 6 percent, and
(B)without compounding until January 1, 1996.
The total amount of the interest charge shall not, when added to the total partial tax computed under section
667(b), exceed the amount of the accumulation distribution (other than the amount of tax deemed distributed by section
666(b) or (c)) in respect of which such partial tax was determined.
(c) Interest charge not deductible
The interest charge determined under this section shall not be allowed as a deduction for purposes of any tax imposed by this title.
A prior section
668, acts Aug. 16, 1954, ch. 736, 68A Stat. 225; Oct. 16, 1962, Pub. L. 87–834, § 7(d),
76 Stat. 986; Dec. 30, 1969, Pub. L. 91–172, title III, § 331(a),
83 Stat. 594, related to treatment of amounts deemed distributed in preceding years, prior to repeal by Pub. L. 94–455, title VII, § 701(a)(3),Oct. 4, 1976, 90 Stat. 1577. See section
667 of this title.
1996—Subsec. (a). Pub. L. 104–188reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of the tax determined under section
667(a), the interest charge is an amount equal to 6 percent of the partial tax computed under section
667(b) multiplied by a fraction—
“(1) the numerator of which is the sum of the number of taxable years between each taxable year to which the distribution is allocated under section
666(a) and the taxable year of the distribution (counting in each case the taxable year to which the distribution is allocated but not counting the taxable year of the distribution), and
“(2) the denominator of which is the number of taxable years to which the distribution is allocated under section
1990—Subsec. (c). Pub. L. 101–508substituted heading for one which read “Special rules” and amended text generally, restating provisions of former par. (1) as entire subsection and striking out former par. (2) which provided that for purposes of this section, undistributed net income existing in a trust as of January 1, 1977, would be treated as allocated under section
666(a) to the first taxable year beginning after December 31, 1976.
Effective Date of 1996 Amendment
Section 1906(d)(1) ofPub. L. 104–188provided that: “The amendment made by subsection (a) [amending this section] shall apply to distributions after the date of the enactment of this Act [Nov. 20, 1996].”
Section 1014(d) ofPub. L. 94–455provided that: “The amendments made by this section [enacting this section and amending section
667 of this title] shall apply to taxable years beginning after December 31, 1976.”
For provisions that nothing in amendment by Pub. L. 101–508be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) ofPub. L. 101–508, set out as a note under section
45K of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
Description of Change
Statutes at Large
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