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26 U.S. Code § 543 - Personal holding company income

(a) General ruleFor purposes of this subtitle, the term “personal holding company income” means the portion of the adjusted ordinary gross incomewhich consists of:

(1) Dividends, etc.Dividends, interest, royalties (other than mineral, oil, or gas royalties orcopyright royalties), and annuities. This paragraph shall not apply to—

(A)

interest constituting rent (as defined in subsection (b)(3)),

(B)

interest on amounts set aside in a reserve fund under chapter533 or535 of title 46, United States Code,

(C)

dividends received by a United Statesshareholder (as defined insection 951(b)) from a controlled foreign corporation(as defined in section 957(a)),

(D)

active business computer software royalties (within the meaning of subsection (d)), and

(E) interest received by a broker or dealer (within the meaning of section 3(a)(4) or (5) of the Securities and Exchange Act of 1934) in connection with—

(i)

any securities or money market instruments held as property described in section 1221(a)(1),

(ii)

margin accounts, or

(iii)

any financing for a customer secured by securities or money market instruments.

(2) RentsTheadjusted income from rents; except that such adjusted income shall not be included if—

(A)

such adjusted income constitutes 50 percent or more of theadjusted ordinary gross income, and

(B) the sum of—

(i)

the dividends paid during the taxable year (determined undersection 562),

(ii)

the dividends considered as paid on the last day of the taxable year undersection 563(c) (as limited by the second sentence of section 563(b)), and

(iii)

the consent dividends for the taxable year (determined undersection 565),

equals or exceeds the amount, if any, by which thepersonal holding company income for the taxable year (computed without regard to this paragraph and paragraph (6), and computed by including aspersonal holding company income copyright royalties and the adjusted income from mineral, oil, and gas royalties) exceeds 10 percent of the ordinary gross income.

(3) Mineral, oil, and gas royaltiesTheadjusted income from mineral, oil, and gas royalties; except that such adjusted income shall not be included if—

(A)

such adjusted income constitutes 50 percent or more of theadjusted ordinary gross income,

(B)

thepersonal holding company income for the taxable year (computed without regard to this paragraph, and computed by including aspersonal holding company income copyright royalties and the adjusted income from rents) is not more than 10 percent of the ordinary gross income, and

(i)

deductions for compensation for personal services rendered by theshareholders, and

(ii)

deductions which are specifically allowable under sections other than section 162,

equals or exceeds 15 percent of theadjusted ordinary gross income.

(4) Copyright royaltiesCopyright royalties; except thatcopyright royalties shall not be included if—

(A)

such royalties (exclusive of royalties received for the use of, or right to use, copyrights or interests in copyrights on works created in whole, or in part, by anyshareholder) constitute 50 percent or more of the ordinary gross income,

(B) thepersonal holding company income for the taxable year computed—

(i)

without regard tocopyright royalties, other than royalties received for the use of, or right to use, copyrights or interests in copyrights in works created in whole, or in part, by any shareholderowning more than 10 percent of the total outstanding capital stock of the corporation,

(ii)

without regard to dividends from any corporation in which the taxpayer owns at least 50 percent of all classes of stock entitled to vote and at least 50 percent of the total value of all classes of stock and which corporation meets the requirements of this subparagraph and subparagraphs (A) and (C), and

(iii)

by including aspersonal holding company income the adjusted income from rentsand theadjusted income from mineral, oil, and gas royalties,

is not more than 10 percent of theordinary gross income, and

(C) the sum of the deductions which are properly allocable to such royalties and which are allowable under section 162, other than—

(i)

deductions for compensation for personal services rendered by theshareholders,

(ii)

deductions for royalties paid or accrued, and

(iii)

deductions which are specifically allowable under sections other than section 162,

equals or exceeds 25 percent of the amount by which theordinary gross income exceeds the sum of the royalties paid or accrued and the amounts allowable as deductions under section 167 (relating to depreciation) with respect tocopyright royalties.

For purposes of this subsection, the term “copyright royalties” means compensation, however designated, for the use of, or the right to use, copyrights in works protected by copyright issued under title 17 of the United States Code and to which copyright protection is also extended by the laws of any country other than the United States of America by virtue of any international treaty, convention, or agreement, or interests in any such copyrighted works, and includes payments from any person for performing rights in any such copyrighted work and payments (other than produced film rentsas defined in paragraph (5)(B)) received for the use of, or right to use, films. For purposes of this paragraph, the term“shareholder” shall include any person who owns stock within the meaning ofsection 544. This paragraph shall not apply to active business computer software royalties.

(5) Produced film rents

(A)

Produced film rents; except that such rentsshall not be included if such rentsconstitute 50 percent or more of the ordinary gross income.

(B)

For purposes of this section, the term “produced film rents” means payments received with respect to an interest in a film for the use of, or right to use, such film, but only to the extent that such interest was acquired before substantial completion of production of such film. In the case of a producer who actively participates in the production of the film, such term includes an interest in the proceeds or profits from the film, but only to the extent such interest is attributable to such active participation.

(6) Use of corporate property by shareholder

(A)

Amounts received as compensation (however designated and from whomever received) for the use of, or the right to use, tangible property of the corporation in any case where, at any time during the taxable year, 25 percent or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for an individual entitled to the use of the property (whether such right is obtained directly from the corporation or by means of a sublease or other arrangement).

(B)

Subparagraph (A) shall apply only to a corporation which haspersonal holding company income in excess of 10 percent of its ordinary gross income.

(i)

without regard to subparagraph (A) or paragraph (2),

(ii)

by excluding amounts received as compensation for the use of (or right to use) intangible property (other than mineral, oil, or gas royalties orcopyright royalties) if a substantial part of the tangible property used in connection with such intangible property is owned by the corporation and all such tangible and intangible property is used in the active conduct of a trade or business by an individual or individuals described in subparagraph (A), and

(iii)

by includingcopyright royalties and adjusted income from mineral, oil, and gas royalties.

(7) Personalservice contracts

(A)

Amounts received under a contract under which the corporation is to furnish personal services; if some person other than the corporation has the right to designate (by name or by description) the individual who is to perform the services, or if the individual who is to perform the services is designated (by name or by description) in the contract; and

(B)

amounts received from the sale or otherdisposition of such a contract.

This paragraph shall apply with respect to amounts received for services under a particular contract only if at some time during the taxable year 25 percent or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for the individual who has performed, is to perform, or may be designated (by name or by description) as the one to perform, such services.

(8) Estates and trusts

Amounts includible in computing the taxable income of the corporation under part I of subchapter J (sec. 641 and following, relating to estates, trusts, and beneficiaries).

(b) DefinitionsFor purposes of this part—

(1) Ordinary gross incomeThe term “ordinary gross income” means the gross incomedetermined by excluding—

(A)

all gains from the sale or otherdisposition of capital assets, and

(B)

all gains (other than those referred to in subparagraph (A)) from the sale or otherdisposition of property described in section 1231(b).

(2) Adjusted ordinary gross incomeThe term “adjusted ordinary gross income” means the ordinary gross incomeadjusted as follows:

(A) RentsFrom thegross income from rents(as defined in the second sentence of paragraph (3) of this subsection) subtract the amount allowable as deductions for—

(i)

exhaustion, wear and tear, obsolescence, and amortization of property other than tangible personal property which is not customarily retained by any one lessee for more than three years,

(ii)

property taxes,

(iii)

interest, and

(iv)

rent,

to the extent allocable, under regulations prescribed by the Secretary, to suchgross income from rents. The amount subtracted under this subparagraph shall not exceed suchgross income from rents.

(B) Mineral royalties, etc.From thegross income from mineral, oil, and gas royalties described in paragraph (4), and from thegross income from working interests in an oil or gas well, subtract the amount allowable as deductions for—

(i)

exhaustion, wear and tear, obsolescence, amortization, and depletion,

(ii)

property and severance taxes,

(iii)

interest, and

(iv)

rent,

to the extent allocable, under regulations prescribed by the Secretary, to suchgross income from royalties or suchgross income from working interests in oil or gas wells. The amount subtracted under this subparagraph with respect to royalties shall not exceed thegross income from such royalties, and the amount subtracted under this subparagraph with respect to working interests shall not exceed thegross income from such working interests.

(i)

interest received on a direct obligation of the United States held for sale to customers in the ordinary course of trade or business by a regular dealer who is making a primary market in such obligations, and

(ii)

interest on a condemnation award, a judgment, and a tax refund.

(D) Certain excluded rents

From thegross income consisting of compensation described in subparagraph (D) of paragraph (3) subtract the amount allowable as deductions for the items described in clauses (i), (ii), (iii), and (iv) of subparagraph (A) to the extent allocable, under regulations prescribed by the Secretary, to suchgross income. The amount subtracted under this subparagraph shall not exceed suchgross income.

(3) Adjusted income from rentsThe term “adjusted income from rents” means the gross incomefrom rents, reduced by the amount subtracted under paragraph (2)(A) of this subsection. For purposes of the preceding sentence, the term“rents” means compensation, however designated, for the use of, or right to use, property, and the interest on debts owed to the corporation, to the extent such debts represent the price for which real property held primarily for sale to customers in the ordinary course of its trade or business was sold or exchanged by the corporation; but such term does not include—

(A)

amounts constitutingpersonal holding company income under subsection (a)(6),

(B)

(C)

produced film rents (as defined in subsection (a)(5)(B)),

(D)

compensation, however designated, for the use of, or the right to use, any tangible personal property manufactured or produced by the taxpayer, if during the taxable year the taxpayer is engaged in substantial manufacturing or production of tangible personal property of the same type, or

(E)

active business computer software royalties (as defined in subsection (d)).

(4) Adjusted income from mineral, oil, and gas royalties

The term “adjusted income from mineral, oil, and gas royalties” means the gross incomefrom mineral, oil, and gas royalties (including production payments and overriding royalties), reduced by the amount subtracted under paragraph (2)(B) of this subsection in respect of such royalties.

In the case of an insurance company other than a life insurance company, the term “gross income” as used in this part means thegross income, as defined in section 832(b)(1), increased by the amount of losses incurred, as defined in section 832(b)(5), and the amount of expenses incurred, as defined in section 832(b)(6), and decreased by the amount deductible under section 832(c)(7) (relating to tax-free interest).

(d) Active business computer software royalties

(1) In generalFor purposes of this section, the term “active business computer software royalties” means any royalties—

(A)

received by any corporation during the taxable year in connection with the licensing of computer software, and

(B)

with respect to which the requirements of paragraphs (2), (3), (4), and (5) are met.

(2) Royalties must be received by corporation actively engaged in computer software businessThe requirements of this paragraph are met if the royalties described in paragraph (1)—

(A)

are received by a corporation engaged in the active conduct of the trade or business of developing, manufacturing, or producing computer software, and

(B) are attributable to computer software which—

(i)

is developed, manufactured, or produced by such corporation (or its predecessor) in connection with the trade or business described in subparagraph (A), or

(ii)

is directly related to such trade or business.

(3) Royalties must constitute at least 50 percent of income

The requirements of this paragraph are met if the royalties described in paragraph (1) constitute at least 50 percent of theordinary gross income of the corporation for the taxable year.

(4) Deductions under sections 162 and 174 relating to royalties must equal or exceed 25 percent of ordinary gross income

(A) In generalThe requirements of this paragraph are met if—

(i)

the sum of the deductions allowable to the corporation under sections 162, 174, 174A, and 195 for the taxable year which are properly allocable to the trade or business described in paragraph (2) equals or exceeds 25 percent of theordinary gross income of such corporation for such taxable year, or

(ii)

the average of such deductions for the 5-taxable year period ending with such taxable year equals or exceeds 25 percent of the averageordinary gross income of such corporation for such period.

If a corporation has not been in existence during the 5-taxable year period described in clause (ii), then the period of existence of such corporation shall be substituted for such 5-taxable year period.

(B) Deductions allowable under section 162

For purposes of subparagraph (A), a deduction shall not be treated as allowable undersection 162 if it is specifically allowable under another section.

(C) Limitation on allowable deductionsFor purposes of subparagraph (A), no deduction shall be taken into account with respect to compensation for personal services rendered by the 5 individualshareholders holding the largest percentage (by value) of the outstanding stock of the corporation. For purposes of the preceding sentence—

(i)

individuals holding less than 5 percent (by value) of the stock of such corporation shall not be taken into account, and

(ii)

stock deemed to be owned by ashareholder solely by attribution from a partner undersection 544(a)(2) shall be disregarded.

(5) Dividends must equal or exceed excess of personal holding company income over 10 percent of ordinary gross income

(A) In generalThe requirements of this paragraph are met if the sum of—

(i)

the dividends paid during the taxable year (determined undersection 562),

(ii)

the dividends considered as paid on the last day of the taxable year undersection 563(c) (as limited by the second sentence of section 563(b)), and

(iii)

the consent dividends for the taxable year (determined undersection 565),

equals or exceeds the amount, if any, by which thepersonal holding company income for the taxable year exceeds 10 percent of the ordinary gross incomeof such corporation for such taxable year.

(B) Computation of personal holding company incomeFor purposes of this paragraph,personal holding company income shall be computed—

(i)

without regard to amounts described in subsection (a)(1)(C),

(ii) without regard to interest income during any taxable year—

(I)

which is in the 5-taxable year period beginning with the later of the 1st taxable year of the corporation or the 1st taxable year in which the corporation conducted the trade or business described in paragraph (2)(A), and

(II)

during which the corporation meets the requirements of paragraphs (2), (3), and (4), and

(iii)

by includingadjusted income from rents andadjusted income from mineral, oil, and gas royalties (within the meaning of paragraphs (2) and (3) of subsection (a)).

(6) Special rules for affiliated group members

(A) In generalIn any case in which—

(i)

the taxpayer receives royalties in connection with the licensing of computer software, and

(ii)

another corporation which is a member of the sameaffiliated group as the taxpayer meets the requirements of paragraphs (2), (3), (4), and (5) with respect to such computer software,

the taxpayer shall be treated as having met such requirements.

(B) Affiliated group

For purposes of this paragraph, the term “affiliated group” has the meaning given such term by section 1504(a).

(Aug. 16, 1954, ch. 736,68A Stat. 186;Pub. L. 86–435, § 1(a), (b),Apr. 22, 1960,74 Stat. 77;Pub. L. 87–403, § 3(c),Feb. 2, 1962,76 Stat. 6;Pub. L. 88–272, title II, § 225(d), (k)(2),Feb. 26, 1964,78 Stat. 81, 93;Pub. L. 88–484, § 3(a),Aug. 22, 1964,78 Stat. 598;Pub. L. 89–809, title I, § 104(h)(2), title II, § 206(a), (b),Nov. 13, 1966,80 Stat. 1559, 1578, 1579;Pub. L. 94–455, title II, § 211(a), title XIX, §§ 1901(b)(32)(D), 1906(b)(13)(A), title XXI, § 2106(a),Oct. 4, 1976,90 Stat. 1544, 1800, 1834, 1902;Pub. L. 94–553, § 105(d),Oct. 19, 1976,90 Stat. 2599;Pub. L. 97–248, title II, § 222(e)(6),Sept. 3, 1982,96 Stat. 480;Pub. L. 98–369, div. A, title VII, § 712(i)(3),July 18, 1984,98 Stat. 948;Pub. L. 99–514, title VI, § 645(a)(1), (2), (4), title XVIII, § 1899A(18),Oct. 22, 1986,100 Stat. 2289, 2291, 2959;Pub. L. 100–647, title I, § 1010(f)(5), title VI, § 6279(a),Nov. 10, 1988,102 Stat. 3454, 3754;Pub. L. 104–188, title I, § 1704(t)(6),Aug. 20, 1996,110 Stat. 1887;Pub. L. 105–206, title VI, § 6023(9),July 22, 1998,112 Stat. 825;Pub. L. 106–170, title V, § 532(c)(2)(E),Dec. 17, 1999,113 Stat. 1930;Pub. L. 108–357, title IV, § 413(c)(8),Oct. 22, 2004,118 Stat. 1507;Pub. L. 109–304, § 17(e)(3),Oct. 6, 2006,120 Stat. 1708;Pub. L. 113–295, div. B, title II, § 207(a),Dec. 19, 2014,128 Stat. 4072;Pub. L. 115–141, div. U, title IV, § 401(a)(134), (135),Mar. 23, 2018,132 Stat. 1190;Pub. L. 119–21, title VII, § 70302(b)(8),July 4, 2025,139 Stat. 192.)

Editorial Notes

References in Text

Section 3(a)(4) and (5) of the Securities and Exchange Act of 1934, referred to in subsec. (a)(1)(E), is classified to section 78c(a)(4) and (5) of Title 15, Commerce and Trade.

Amendments

2025—Subsec. (d)(4)(A)(i).Pub. L. 119–21 inserted “174A,” after “174,”.

2018—Subsec. (a)(2)(B)(ii).Pub. L. 115–141, § 401(a)(134), substituted “section 563(c)” for “section 563(d)”.

Subsec. (d)(5)(A)(ii).Pub. L. 115–141, § 401(a)(135), substituted “section 563(c)” for “section 563(d)”.

2014—Subsec. (a)(1)(C) to (E).Pub. L. 113–295 added subpar. (C) and redesignated former subpars. (C) and (D) as (D) and (E), respectively.

2006—Subsec. (a)(1)(B).Pub. L. 109–304 substituted “chapter533 or535 of title 46, United States Code” for “section 511 or 607 of theMerchant Marine Act, 1936 (46 U.S.C. App. 1161 or 1177)”.

2004—Subsec. (b)(1).Pub. L. 108–357 inserted “and” at end of subpar. (A), substituted a period for “, and” at end of subpar. (B), and struck out subpar. (C) which read as follows: “in the case of a foreign corporation all of the outstanding stock of which during the last half of the taxable year is owned by nonresident alien individuals (whether directly or indirectly through foreign estates, foreign trusts, foreign partnerships, or other foreign corporations), all items of income which would, but for this subparagraph, constitute personal holding company incomeunder any paragraph of subsection (a) other than paragraph (7) thereof:”.

1999—Subsec. (a)(1)(D)(i).Pub. L. 106–170 substituted “1221(a)(1)” for “1221(1)”.

1998—Subsec. (d)(5)(A)(ii).Pub. L. 105–206 substituted “section 563(d)” for “section 563(c)”.

1996—Subsec. (a)(2)(B)(ii).Pub. L. 104–188 substituted “563(d)” for “563(c)”.

1988—Subsec. (a)(1)(D).Pub. L. 100–647, § 6279(a), added subpar. (D).

Subsec. (c).Pub. L. 100–647, § 1010(f)(5), substituted “other than life insurance companies” for “other than life or mutual” in heading and “other than a life insurance company” for “other than life or mutual” in text.

1986—Subsec. (a)(1)(B).Pub. L. 99–514, § 1899A(18), substituted “46 U.S.C. App.” for “46 U.S.C.”.

Subsec. (a)(1)(C).Pub. L. 99–514, § 645(a)(1), added subpar. (C).

Subsec. (a)(4).Pub. L. 99–514, § 645(a)(4)(A), inserted “This paragraph shall not apply to active business computer software royalties.”

Subsec. (b)(3)(E).Pub. L. 99–514, § 645(a)(4)(B), added subpar. (E).

Subsec. (d).Pub. L. 99–514, § 645(a)(2), added subsec. (d).

1984—Subsec. (a)(1)(C).Pub. L. 98–369 struck out subpar. (C) providing for nonapplication of par. (1) to dividends to which section 302(b)(4) would apply if the corporation were an individual.

1982—(a)(1)(C).Pub. L. 97–248 added subpar. (C).

1976—Subsec. (a)(1).Pub. L. 94–455, § 1901(b)(32)(D), inserted in subpar. (B) “(46 U.S.C. 1161 or 1177)” after “Merchant Marine Act, 1936”, and struck out subpar. (C) relating to a dividend distribution of divested stock.

Subsec. (a)(4).Pub. L. 94–553 struck out “(other than by reason of section 2 or 6 thereof)” after “title 17 of the United States Code”.

Subsec. (a)(5)(B).Pub. L. 94–455, § 211(a), inserted “In the case of a producer who actually participates in the production of the film, such term includes an interest in the proceeds or profits from the film, but only to the extent such interest is attributable to such active participation”.

Subsec. (a)(6).Pub. L. 94–455, § 2106(a), redesignated existing provisions as subpars. (A), (B), and (C) and, as redesignated, inserted in subpar. (A) “tangible” after “right to use” and in subpar. (C) inserted exclusions from income embodied in cl. (ii).

Subsec. (b)(2)(A), (B), (D).Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

1966—Subsec. (a)(2).Pub. L. 89–809, § 206(b)(1), struck out provision that royalties received for the use of, or for the privilege of using, a patent, invention, model, or design, secret formula, process, or other similar property right be treated as rent if such property right is also used by the corporation receiving such royalties in the manufacture or production of tangible personal property held for lease to customers and if the amount constituting rent from such leases to customers meets the requirement of subparagraph (A).

Subsec. (b)(1)(C).Pub. L. 89–809, § 104(h)(2), added subpar. (C).

Subsec. (b)(2)(D).Pub. L. 89–809, § 206(b)(2), added subpar. (D).

Subsec. (b)(3).Pub. L. 89–809, § 206(a), struck out “amounts constituting personal holding company incomeunder subsection (a)(6), nor copyright royalties(as defined in subsection (a)(4)), nor produced film rents(as defined in subsection (a)(5)(B)).” after “but does not include”, and added subpars. (A) to (D).

1964—Subsec. (a).Pub. L. 88–272, § 225(d), amended subsec. (a) generally, and among other changes, substituted“adjusted ordinary gross income” for“gross income”, provided, relative to rental income, that in addition to the 50-percent test of par. (2)(A), now applied on the basis of adjusted income from rentsand adjusted ordinary gross income, a second test for exclusion shall be whether the sum on the dividends paid during the taxable year, the dividends paid on the last day of the year, and the consent dividends for the taxable year, equals or exceeds the amount by which the personal holding company incomefor the year exceeds 10 percent of the ordinary gross income, relative to mineral, oil, and gas royalties, that in addition to the 50-percent test of par. (3)(A), now applied on the basis of adjusted ordinary gross income, and the 15-percent test of par. (3)(C), from which test have been excluded deductions “specifically allowable under sections other than section 162” and is also now applied on the basis of adjusted gross income, the royalties shall be excluded if the personal holding company incomefor the taxable year is not more than 10 percent of the ordinary gross income, relative to copyright royalties, retained the 50-percent test as in par. (4)(A), making it applicable to ordinary gross income, included in the computation of the income for the taxable year the adjusted income from rentsand the adjusted income from mineral, oil, and gas royalties, excluded from the sum of deductions allocable to royalties, deductions specifically allowable under sections other than 162, and changed the requirement that deductions constitute 50 percent or more of gross incometo provide that they must equal 25 percent of ordinary gross incomereduced by royalties paid and by depreciation deductions with respect to copyrights, relative to produced film rents, that they be treated on their own basis and not as rentals, and defined“produced film rents”, relative to use of corporation property by shareholders, that personal holding company incomeincludes copyright royaltiesand the adjusted income from mineral, oil, and gas royalties, eliminated gains from the sale or other dispositionof any interest in an estate or trust, from the sale or exchange of stock or securities, and from futures transactions in any commodity, and also definition of“rents”. See subsec. (b)(3).

Subsec. (a)(2).Pub. L. 88–484 inserted sentence requiring royalties received for the use of, or for the privilege of using, a patent, invention, model, or design (whether or not patented), secret formula or process, or any other similar property right to be treated as rent, if such property right is also used by the corporation receiving such royalties in the manufacture or production of tangible personal property held for lease to customers, and if the amount (computed without regard to this sentence) constituting rent from such leases to customers meets the requirements of subparagraph (A).

Subsec. (b).Pub. L. 88–272, § 225(d), added subsec. (b). Former subsec. (b), which provided that gross incomeand personal holding company incomedetermined with respect to transactions relating to gains from stock and security transactions, and with respect to transactions relating to gains from commodity transactions, should include only the excess of gains over losses from such transactions, was struck out.

Subsec. (d).Pub. L. 88–272, § 225(k)(2), struck out subsec. (d) which related to special adjustment on dispositionof antitrust stock received as a dividend.

1962—Subsec. (a)(1).Pub. L. 87–403 prescribed conditions making inapplicable the provisions of the paragraph to dividend distribution of divested stock.

Subsec. (d).Pub. L. 87–403 added subsec. (d).

1960—Subsec. (a)(1).Pub. L. 86–435, § 1(b)(1), excluded copyright royalties.

Subsec. (a)(6).Pub. L. 86–435, § 1(b)(2), inserted sentence providing that copyright royaltiesconstitute personal holding company income.

Subsec. (a)(9).Pub. L. 86–435, § 1(a), added par. (9).

Statutory Notes and Related Subsidiaries

Effective Date of 2025 Amendment

Amendment byPub. L. 119–21 applicable to amounts paid or incurred in taxable years beginning afterDec. 31, 2024, subject to election for retroactive application by certain small businesses and election to deduct certain unamortized amounts paid or incurred in taxable years beginning beforeJan. 1, 2025, see section 70302(e), (f) ofPub. L. 119–21, set out as an Effective Date note undersection 174A of this title.

Effective Date of 2014 Amendment

Pub. L. 113–295, div. B, title II, § 207(b),Dec. 19, 2014,128 Stat. 4072, provided that:

“The amendments made by this Act [probably means this section,section 207 of title II of div. B of Pub. L. 113–295, which amended this section] shall apply to taxable years ending on or after the date of the enactment of this Act [Dec. 19, 2014].”

Effective Date of 2004 Amendment

Amendment byPub. L. 108–357 applicable to taxable years of foreign corporations beginning afterDec. 31, 2004, and to taxable years of United States shareholderswith or within which such taxable years of foreign corporations end, seesection 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note undersection 1 of this title.

Effective Date of 1999 Amendment

Amendment byPub. L. 106–170 applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or afterDec. 17, 1999, seesection 532(d) of Pub. L. 106–170, set out as a note undersection 170 of this title.

Effective Date of 1988 Amendment

Amendment bysection 1010(f)(5) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of theTax Reform Act of 1986,Pub. L. 99–514, to which such amendment relates, seesection 1019(a) of Pub. L. 100–647, set out as a note undersection 1 of this title.

Pub. L. 100–647, title VI, § 6279(b),Nov. 10, 1988,102 Stat. 3754, provided that:

“The amendments made by this section [amending this section] shall apply to interest received after the date of the enactment of this Act [Nov. 10, 1988], in taxable years ending after such date.”

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, § 645(e),Oct. 22, 1986,100 Stat. 2292, provided that:

“The amendments made by subsection (a) [amending this section andsection 553 of this title] shall apply to royalties received before, on, and afterDecember 31, 1986.”

Effective Date of 1984 Amendment

Amendment byPub. L. 98–369 effective as if included in the provision of theTax Equity and Fiscal Responsibility Act of 1982,Pub. L. 97–248, to which such amendment relates, seesection 715 of Pub. L. 98–369, set out as a note undersection 31 of this title.

Effective Date of 1982 Amendment

Amendment byPub. L. 97–248 applicable to distributions afterAug. 31, 1982, with exceptions for certain partial liquidations, seesection 222(f) of Pub. L. 97–248, set out as a note undersection 302 of this title.

Effective Date of 1976 Amendment

Amendment byPub. L. 94–553 effectiveJan. 1, 1978, seesection 102 of Pub. L. 94–553, set out as an Effective Date note precedingsection 101 of Title 17, Copyrights.

Pub. L. 94–455, title II, § 211(b),Oct. 4, 1976,90 Stat. 1545, provided that:

“The amendment made by subsection (a) [amending this section] shall apply to taxable years ending on or afterDecember 31, 1975.”

Amendment bysection 1901(b)(32)(D) of Pub. L. 94–455 applicable with respect to taxable years beginning afterDec. 31, 1976, seesection 1901(d) of Pub. L. 94–455, set out as a note undersection 2 of this title.

Pub. L. 94–455, title XXI, § 2106(b),Oct. 4, 1976,90 Stat. 1903, provided that:

“The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning afterDecember 31, 1976.”

Effective Date of 1966 Amendment

Amendment bysection 104(h)(2) of Pub. L. 89–809 applicable with respect to taxable years beginning afterDec. 31, 1966, seesection 104(n) of Pub. L. 89–809, set out as a note undersection 11 of this title.

Pub. L. 89–809, title II, § 206(c),Nov. 13, 1966,80 Stat. 1579, provided that:

“The amendments made by subsections (a) and (b) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Nov. 13, 1966]. Such amendments shall also apply, at the election of the taxpayer (made at such time and in such manner as the Secretary or his delegate may prescribe), to taxable years beginning on or before such date and ending afterDecember 31, 1965.”

Effective Date of 1964 Amendment

Pub. L. 88–484, § 3(b),Aug. 22, 1964,78 Stat. 598, provided that:

“The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning afterDecember 31, 1963.”

Amendment byPub. L. 88–272 applicable to taxable years beginning afterDec. 31, 1963, see section 225(l) ofPub. L. 88–272, set out as a note undersection 316 of this title.

Effective Date of 1962 Amendment

Amendment byPub. L. 87–403 applicable only with respect to distributions made afterFeb. 2, 1962, seesection 3(g) of Pub. L. 87–403, set out as a note undersection 312 of this title.

Effective Date of 1960 Amendment

Pub. L. 86–435, § 2,Apr. 22, 1960,74 Stat. 78, provided that:

“The amendments made by the first section of this Act [amending this section and sections544 and553 of this title] shall apply only with respect to taxable years beginning afterDecember 31, 1959.”

Treatment of Certain Bank Holding Companies

Pub. L. 100–647, title VI, § 6280,Nov. 10, 1988,102 Stat. 3754, provided that:

“(a) General Rule.—

For purposes of subtitle A of the 1986 Code, the term ‘personal holding company income’ shall not include any dividend received by a qualified bank holding company from a 25-percent owned bank during any taxable year ending in 1989 or 1990.

“(b) $3,000,000 Limitation.—

The aggregate amount excluded from thepersonal holding company income of any qualified bank holding company under subsection (a) for the taxable year shall not exceed $3,000,000.

“(c) Qualified Bank Holding Company.—

For purposes of this section, the term ‘qualified bank holding company’ means any bank holding company (as defined in section 2(a) of theBank Holding Company Act of 1956 [12 U.S.C. 1841(a)]) if 80 percent or more (by value) of the assets of such company at all times during the taxable year consist of stock in 1 or more 25-percent owned banks.

“(d) 25-Percent Owned Bank.—

For purposes of this section, the term ‘25-percent owned bank’ means any bank (as defined in section 581 of the 1986 Code) if at least 25 percent of the stock of such bank (by vote and value) is owned by the bank holding company.”

Special Rules for Broker-Dealers, Royalties Received by Qualified Taxpayer, and Treatment of Active Business Computer Royalties for S Corporation Purposes

Pub. L. 99–514, title VI, § 645(b)–(d),Oct. 22, 1986,100 Stat. 2292, provided that:

“(b) Special Rules for Broker-Dealers.—In the case of a broker-dealer which is part of anaffiliated group which files a consolidated Federal income tax return, the common parent of which was incorporated in Nevada onJanuary 27, 1972, the personal holding company income(within the meaning of section 543 of theInternal Revenue Code of 1986) of such broker-dealer, shall not include any interest received after the date of the enactment of this Act [Oct. 22, 1986] with respect to—

“(1)

any securities or money market instruments held as inventory,

“(2)

margin accounts, or

“(3)

any financing for a customer secured by securities or money market instruments.

“(c) Special Rule for Royalties Received by Qualified Taxpayer.—

“(1) In general.—

Any qualified royalty received or accrued in taxable years beginning afterDecember 31, 1981, by a qualified taxpayer shall be treated in the same manner as a royalty with respect to software is treated under the amendments made by this section [amending this section andsection 553 of this title].

“(2) Qualified taxpayer.—

For purposes of this subsection, a qualified taxpayer is any taxpayer incorporated onSeptember 7, 1978, which is engaged in the trade or business of manufacturing dolls and accessories.

“(3) Qualified royalty.—

For purposes of this subsection, the term ‘qualified royalty’ means any royalty arising from an agreement entered into in 1982 which permits the licensee to manufacture and sell dolls and accessories.

“(d) Special Rule for Treatment of Active Business Computer Royalties for S Corporation Purposes.—

In the case of a taxpayer which was incorporated onMay 3, 1977, in California and which elected to be taxed as an S corporation for its taxable year ending onDecember 31, 1985, any active business computer royalties (within the meaning of section 543(d) of theInternal Revenue Code of 1986 as added by this Act) which are received by the taxpayer in taxable years beginning afterDecember 31, 1984, shall not be treated as passive investment income (within the meaning ofsection 1362(d)(3)(D) [now section 1362(d)(3)(C)]) for purposes of subchapter S of chapter 1 of such Code.”

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 and1171–1177] or title XVIII [§§ 1800–1899A] ofPub. 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 afterJan. 1, 1989, seesection 1140 of Pub. L. 99–514, as amended, set out as a note undersection 401 of this title.

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26 U.S. Code § 543 - Personal holding company income

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