Editorial Notes
Amendments
2003—Subsec. (c)(5)(C). Pub. L. 108–27 struck out “, 341(e)(12),” after “170(e)”.
1988—Subsec. (c)(5)(C). Pub. L. 100–647, § 1005(c)(10), made technical correction to directory language of Pub. L. 99–514, § 511(d)(2)(A). See 1986 Amendment note below.
Subsec. (e)(3)(A). Pub. L. 100–647, § 1002(i)(2)(H), at end of table inserted item relating to any railroad grading or tunnel bore.
1986—Subsec. (b)(4)(A). Pub. L. 99–514, § 1807(b)(2)(A), substituted “statutory recovery period” for “statutory recover period”.
Subsec. (c)(4). Pub. L. 99–514, § 1807(b)(2)(B), substituted “subsection (b)(4)(A)” for “subsection (b)(3)(A)”.
Subsec. (c)(5)(C). Pub. L. 99–514, § 631(e)(10), struck out “453B(d)(2),” after “341(e)(12),”.
Pub. L. 99–514, § 511(d)(2)(A), as amended by Pub. L. 100–647, § 1005(c)(10), struck out “163(d),” after “sections”.
Subsec. (d)(2). Pub. L. 99–514, § 1807(b)(2)(C), substituted “section 1274(c)(4)(C)” for “section 1274(c)(2)(C)”.
Subsec. (e)(3)(A). Pub. L. 99–514, § 201(d)(8)(A), in amending subpar. (A) generally, included in table 7-year property, 15-year and 20-year property, and residential rental property and nonresidential real property having recovery periods of 7, 15, and 19 years, respectively, and struck out from table low-income housing, 15-year public utility property, and 19-year real property having recovery periods of 15, 15, and 19 years, respectively.
Pub. L. 99–514, § 1879(f)(1), substituted “19-year real property” and “19 years” for “18-year real property” and “18 years”, respectively.
Subsec. (e)(3)(B). Pub. L. 99–514, § 201(d)(8)(A), in amending subpar. (B) generally, substituted in heading “not depreciable under section 168” for “which is not recovery property” and in text “In the case of property to which section 168 does not apply, subparagraph (A) shall be applied as if section 168 applies to such property.” for “In the case of any property, which is not recovery property, subparagraph (A) shall be applied as if such property were recovery property.”
Subsec. (e)(5). Pub. L. 99–514, § 201(d)(8)(B), substituted “section 465(b)(3)(C)” for “section 168(e)(4)(D)”.
Pub. L. 99–514, § 1807(b)(2)(D), substituted “section 168(e)(4)(D)” for “section 168(d)(4)(D)”.
Subsec. (g). Pub. L. 99–514, § 1807(b)(1), inserted at end “The preceding sentence shall not apply to any amount to which section 404 or 404A (or any other provision specified in regulations) applies.”
Statutory Notes and Related Subsidiaries
Effective Date of 1986 Amendment
Amendment by section 201(d)(8) of Pub. L. 99–514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Pub. L. 99–514, set out as a note under section 168 of this title.
Amendment by section 201(d)(8) of Pub. L. 99–514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Pub. L. 99–514, set out as a note under section 46 of this title.
Amendment by section 511(d)(2)(A) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 511(e) of Pub. L. 99–514, set out as a note under section 163 of this title.
Amendment by section 631(e)(10) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.
Amendment by section 1807(b) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Pub. L. 99–514, title XVIII, § 1879(f)(2), Oct. 22, 1986, 100 Stat. 2906, provided that:
“The amendments made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by
section 103 of Public Law 99–121.”
Effective Date
Pub. L. 98–369, div. A, title I, § 92(c), July 18, 1984, 98 Stat. 612, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.—
Except as otherwise provided in this subsection, the amendments made by this section [enacting this section] shall apply with respect to agreements entered into after June 8, 1984.
“(2) Exceptions.—The amendments made by this section shall not apply—
“(A)
to any agreement entered into pursuant to a written agreement which was binding on June 8, 1984, and at all times thereafter,
“(B) subject to the provisions of paragraph (3), to any agreement to lease property if—
“(i)
there was in effect a firm plan, evidenced by a board of directors’ resolution, memorandum of agreement, or letter of intent on March 15, 1984, to enter into such an agreement, and
“(ii)
construction of the property was commenced (but such property was not placed in service) on or before March 15, 1984, and
“(C) to any agreement to lease property if—
“(i)
the lessee of such property adopted a firm plan to lease the property, evidenced by a resolution of the Finance Committee of the Board of Directors of such lessee, on February 10, 1984,
“(ii) the sum of the present values of the rents payable by the lessee under the lease at the inception thereof equals at least $91,223,034, assuming for purposes of this clause—
“(I)
the annual discount rate is 12.6 percent,
“(II)
the initial payment of rent occurs 12 months after the commencement of the lease, and
“(III)
subsequent payments of rents occur on the anniversary date of the initial payment, and
“(iii) during—
“(I)
the first 5 years of the lease, at least 9 percent of the rents payable by the lessee under the agreement are paid, and
“(II)
the second 5 years of the lease, at least 16.25 percent of the rents payable by the lessee under the agreement are paid.
Paragraph (3)(B)(ii)(II) shall apply for purposes of clauses (ii) and (iii) of subparagraph (C), as if, as of the beginning of the last stage, the separate agreements were treated as 1 single agreement relating to all property covered by the agreements, including any property placed in service before the property to which the agreement for the last stage relates. If the lessor under the agreement described in subparagraph (C) leases the property from another person, this exception shall also apply to any agreement between the lessor and such person which is integrally related to, and entered into at the same time as, such agreement, and which calls for comparable payments of rent over the primary term of the agreement.
“(3) Schedule of deemed rental payments.—
“(A) In general.—In any case to which paragraph (2)(B) applies, for purposes of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the lessor shall be treated as having received or accrued (and the lessee shall be treated as having paid or incurred) rents equal to the greater of—
“(i)
the amount of rents actually paid under the agreement during the taxable year, or
“(ii)
the amount of rents determined in accordance with the schedule under subparagraph (B) for such taxable year.
“(B) Schedule.—
“(i) In general.—
The schedule under this subparagraph is as follows:
|
1st ⅕
|
10
|
|
2nd ⅕
|
25
|
|
3rd ⅕
|
45
|
|
4th ⅕
|
70
|
|
Last ⅕
|
100.
|
“(ii) Operating rules.—For purposes of this schedule—
“(I)
the rent allocable to each taxable year within any portion of a lease term described in such schedule shall be a level pro rata amount properly allocable to such taxable year, and
“(II)
any agreement relating to property which is to be placed in service in 2 or more stages shall be treated as 2 or more separate agreements.
“(C) Paragraph not to apply.—
This paragraph shall not apply to any agreement if the sum of the present values of all payments under the agreement is greater than the sum of the present value of all the payments deemed to be paid or received under the schedule under subparagraph (B). For purposes of computing any present value under this subparagraph, the annual discount rate shall be equal to 12 percent, compounded semiannually.”
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.
