I.R.C. § 74(a) General Rule —
Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as
prizes and awards.
I.R.C. § 74(b) Exception For Certain Prizes And Awards Transferred To Charities —
Gross income does not include amounts received as prizes and awards made primarily
in recognition of religious, charitable, scientific, educational, artistic, literary,
or civic achievement, but only if—
I.R.C. § 74(b)(1) —
the recipient was selected without any action on his part to enter the contest or
proceeding;
I.R.C. § 74(b)(2) —
the recipient is not required to render substantial future services as a condition
to receiving the prize or award; and
I.R.C. § 74(b)(3) —
the prize or award is transferred by the payor to a governmental unit or organization
described in paragraph (1) or (2) of section 170(c) pursuant to a designation made by the recipient.
I.R.C. § 74(c) Exception For Certain Employee Achievement Awards
I.R.C. § 74(c)(1) In General —
Gross income shall not include the value of an employee achievement award (as defined
in section 274(j)) received by the taxpayer if the cost to the employer of the employee achievement
award does not exceed the amount allowable as a deduction to the employer for the
cost of the employee achievement award.
I.R.C. § 74(c)(2) Excess Deduction Award —
If the cost to the employer of the employee achievement award received by the taxpayer
exceeds the amount allowable as a deduction to the employer, then gross income includes
the greater of—
I.R.C. § 74(c)(2)(A) —
an amount equal to the portion of the cost to the employer of the award that is
not allowable as a deduction to the employer (but not in excess of the value of the
award), or
I.R.C. § 74(c)(2)(B) —
the amount by which the value of the award exceeds the amount allowable as a deduction
to the employer.
The remaining portion of the value of such award shall
not be included in the gross income of the recipient.
I.R.C. § 74(c)(3) Treatment Of Tax-Exempt Employers —
In the case of an employer exempt from taxation under this subtitle, any reference
in this subsection to the amount allowable as a deduction to the employer shall be
treated as a reference to the amount which would be allowable as a deduction to the
employer if the employer were not exempt from taxation under this subtitle.
I.R.C. § 74(c)(4) Cross Reference —
For provisions excluding certain de minimis fringes from gross income, see section
132(e).
I.R.C. § 74(d) Exception For Olympic And Paralympic Medals And Prizes
I.R.C. § 74(d)(1) In General —
Gross income shall not include the value of any medal awarded in, or any prize money
received from the United States Olympic Committee on account of, competition in the
Olympic Games or Paralympic Games.
I.R.C. § 74(d)(2) Limitation Based On Adjusted Gross Income
I.R.C. § 74(d)(2)(A) In General —
Paragraph (1) shall not apply to any taxpayer for any taxable year if the adjusted gross income
(determined without regard to this subsection) of such taxpayer for such taxable year
exceeds $1,000,000 (half of such amount in the case of a married individual filing
a separate return).
I.R.C. § 74(d)(2)(B) Coordination With Other Limitations —
For purposes of sections 85(c), 86, 135, 137, 219, 221, and 469, adjusted gross income shall be determined after the application of paragraph (1) and before the application of subparagraph (A).
(Aug. 16, 1954, ch. 736, 68A Stat. 24; Oct. 22, 1986,
Pub. L. 99-514, title I, 122(a)(1), 123(b)(1), 100 Stat. 2109, 2113; Pub. L. 114-239, Sec. 2, Oct. 7, 2016; Pub. L. 115-97, title I, Sec. 13305(b)(1), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 116-260, Div. EE, title I, Sec. 104(b)(2)(C), Dec. 27, 2020, 134 Stat. 1182; Pub. L. 117-2, title IX, Sec. 9042(b)(1), Mar. 11, 2021, 135 Stat. 4.)
BACKGROUND NOTES
AMENDMENTS
2021—Subsec. (d)(2)(B). Pub. L. 117-2, Sec. 9042(b)(1), amended subpar. (B) by inserting “85(c),” before “86”.
2020—Subsec. (d)(2)(B). Pub. L. 116-260, Div. EE, Sec. 104(b)(2)(C), amended subpar. (B) by striking “222,”.
2017 —
Subsec. (d)(2)(B). Pub. L. 115-97, title I, Sec. 13305(b)(1), amended subpar. (B) by striking ‘‘199,”.
2016—Subsec. (d). Pub. L. 114-239, Sec. 2(a), added subsec. (d).
1986—Subsec.
(a). Pub. L. 99-514, 123(b)(1), which directed that subsec. (a) be amended by substituting
“(relating to qualified scholarships)” for “(relating to scholarship and fellowship
grants)”, was executed by making the substitution for
“(relating to scholarships and fellowship grants)” to reflect the probable intent
of Congress.
Pub. L. 99-514, 122(a)(1)(A), substituted “Except as otherwise provided in this section or” for
“Except as provided in subsection (b) and”.
Subsec. (b). Pub. L. 99-514, 122(a)(1)(B), (C), inserted “for certain prizes and awards transferred to charities”
in heading and added par.
(3).
Subsec. (c). Pub. L. 99-514, 122(a)(1)(D), added subsec. (c).
EFFECTIVE DATE OF 2021 AMENDMENT
Amendment by Pub. L. 117-2, Sec. 9042(b)(1), effective for taxable years beginning after December 31, 2019.
EFFECTIVE DATE OF 2020 AMENDMENT
Amendment by Pub. L. 116-260, Div. EE, Sec. 104(b)(2), effective for taxable years beginning after December 31,
2020.
EFFECTIVE DATE OF 2017 AMENDMENT
Amendment by Pub. L. 115-97, Sec. 13305(b)(1), effective for taxable years beginning after December 31, 2017. Pub. L. 115-141, Div .T, Sec. 101(c), added the following transition rule:
“(2) TRANSITION RULE FOR QUALIFIED PAYMENTS OF PATRONS OF COOPERATIVES.—
‘‘(A) IN GENERAL.—The amendments made by this section shall not apply to a qualified
payment received by a taxpayer from a specified agricultural or horticultural cooperative
in a taxable year of the taxpayer beginning after December 31, 2017, which is attributable
to qualified production activities income with respect to which a deduction is allowable
to the cooperative under section 199 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) for a taxable year
of the cooperative beginning before January 1, 2018. Any term used in this subparagraph
which is also used in section 199 of such Code (as so in effect) shall have the same
meaning as when used in such section.
‘‘(B) COORDINATION WITH SECTION 199A.—No deduction shall be allowed under section
199A of such Code for any qualified payment to which subparagraph
(A) applies.’’
EFFECTIVE DATE OF 2016 AMENDMENT
Amendment by section 2 of Pub. L. 114-239 effective for prizes and awards received after December 31, 2015.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 122(a)(1)
of Pub. L. 99-514 applicable to prizes and awards granted after Dec. 31, 1986, see section 151(c)
of Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 123(b)(1) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, but only in the case of
scholarships and fellowships granted after Aug. 16, 1986, see section 151(d) of Pub. L. 99-514, set out as a note under section 1 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99-514 IN RELATION TO TREATY OBLIGATIONS
OF UNITED STATES
For nonapplication of amendment by section 123(b)(1)
of Pub. L. 99-514 to the extent application of such amendment would be contrary to any treaty obligation
of the United States in effect on Oct. 22, 1986, see section 1012(aa)(3) of Pub. L. 100-647, set out as a note under section 861 of this title.
