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Internal Revenue Code, § 4979. Tax On Certain Excess Contributions

I.R.C. § 4979(a) General Rule
In the case of any plan, there is hereby imposed a tax for the taxable year equal to 10 percent of the sum of—
I.R.C. § 4979(a)(1)
any excess contributions under such plan for the plan year ending in such taxable year, and
I.R.C. § 4979(a)(2)
any excess aggregate contributions under the plan for the plan year ending in such taxable year.
I.R.C. § 4979(b) Liability For Tax
The tax imposed by subsection (a) shall be paid by the employer.
I.R.C. § 4979(c) Excess Contributions
For purposes of this section, the term “excess contributions" has the meaning given such term by sections 401(k)(8)(B), 408(k)(6)(C), and 501(c)(18).
I.R.C. § 4979(d) Excess Aggregate Contribution
For purposes of this section, the term “excess aggregate contribution” has the meaning given to such term by section 401(m)(6)(B). For purposes of determining excess aggregate contributions under an annuity contract described in section 403(b), such contract shall be treated as a plan described in subsection (e)(1).
I.R.C. § 4979(e) Plan
For purposes of this section, the term “plan” means—-
I.R.C. § 4979(e)(1)
a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),
I.R.C. § 4979(e)(2)
any annuity plan described in section 403(a),
I.R.C. § 4979(e)(3)
any annuity contract described in section 403(b),
I.R.C. § 4979(e)(4)
a simplified employee pension of an employer which satisfies the requirements of section 408(k), and
I.R.C. § 4979(e)(5)
a plan described in section 501(c)(18).
Such term includes any plan which, at any time, has been determined by the Secretary to be such a plan.
I.R.C. § 4979(f) No Tax Where Excess Distributed Within Specified Period After Close Of Year
I.R.C. § 4979(f)(1) In General
No tax shall be imposed under this section on any excess contribution or excess aggregate contribution, as the case may be, to the extent such contribution (together with any income allocable thereto through the end of the plan year for which the contribution was made) is distributed (or, if forfeitable, is forfeited) before the close of the first 21/2 months (6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3))) of the following plan year.
I.R.C. § 4979(f)(2) Year Of Inclusion
Any amount distributed as provided in paragraph (1) shall be treated as earned and received by the recipient in the recipient's taxable year in which such distributions were made.
(Added Pub. L. 99-514, title XI, 1117(b)(1), Oct. 22, 1986, 100 Stat. 2461, and amended Pub. L. 100-647, title I, 1011(l)(8)-(11), Nov. 10, 1988, 102 Stat. 3470, 3471; Pub. L. 109-280, title IX, Sec. 902(e), Aug. 17, 2006, 120 Stat. 780.)
BACKGROUND NOTES
AMENDMENTS
2006 - Subsec. (f). Pub. L. 109-280, Sec. 902(e)(1)(B), amended the heading of subsec. (f) by substituting “Specified Period After” for “2 1/2 Months Of”.
Subsec. (f)(1). Pub. L. 109-280, Sec. 902(e)(1)(A), amended par. (1) by inserting “(6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3)))” after “2 1/2 months”.
Subsec. (f)(1). Pub. L. 109-280, Sec. 902(e)(3), amended par. (1) by adding “through the end of the plan year for which the contribution was made” after “thereto”.
Subsec. (f)(2). Pub. L. 109-280, Sec. 902(e)(2), amended par. (2). Before amendment it read as follows:
“(2) Year of inclusion
“(A) In general
“Except as provided in subparagraph (B), any amount distributed as provided in paragraph (1) shall be treated as received and earned by the recipient in his taxable year for which such contribution was made.
“(B) De minimis distributions
“If the total excess contributions and excess aggregate contributions distributed to a recipient under a plan for any plan year are less than $100, such distributions (and any income allocable thereto) shall be treated as earned and received by the recipient in his taxable year in which such distributions were made.”
1988--Subsec. (a)(1). Pub. L. 100-647, 1011(l)(8), struck out “a cash or deferred arrangement which is part of” after “contributions under”.
Subsec. (c). Pub. L. 100-647, 1011(l)(9), struck out “403(b),” and substituted “408(k)(6)(C)” for “408(k)(8)(B)”.
Subsec. (d). Pub. L. 100-647, 1011(l)(10), inserted sentence at end relating to determination of excess aggregate contributions under certain annuity contracts.
Subsec. (f)(2). Pub. L. 100-647, 1011(l)(11), substituted “Year of inclusion” for “Included in prior year” as heading, and amended text generally. Prior to amendment, text read as follows: “Any amount distributed as provided in paragraph (1) shall be treated as received and earned by the recipient in his taxable year for which such contribution was made.”
EFFECTIVE DATE OF 2006 AMENDMENTS
Amendments by Pub. L. 109-280, Sec. 902(e), effective for plan years beginning after 2007.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise 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.
EFFECTIVE DATE
Section applicable to plan years beginning after Dec. 31, 1986, with special provisions for plans maintained pursuant to collective bargaining agreements ratified before Mar. 1, 1986, and for annuity contracts under section 403(b) of this title, see section 1117(d) of Pub. L. 99-514, set out as an Effective Date of 1986 Amendment note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by section 1117(b)(1) 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, set out as a note under section 401 of this title.
ISSUANCE OF FINAL REGULATIONS
The Secretary of the Treasury or a delegate of the Secretary shall issue before Feb. 1, 1988, final regulations to carry out this section, see section 1141 of Pub. L. 99-514, set out as a note under section 401 of this title.