
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC111]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
         PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
 
Sec. 111. Recovery of tax benefit items


(a) Deductions

    Gross income does not include income attributable to the recovery 
during the taxable year of any amount deducted in any prior taxable year 
to the extent such amount did not reduce the amount of tax imposed by 
this chapter.

(b) Credits

                           (1) In general

        If--
            (A) a credit was allowable with respect to any amount for 
        any prior taxable year, and
            (B) during the taxable year there is a downward price 
        adjustment or similar adjustment,

    the tax imposed by this chapter for the taxable year shall be 
    increased by the amount of the credit attributable to the 
    adjustment.

            (2) Exception where credit did not reduce tax

        Paragraph (1) shall not apply to the extent that the credit 
    allowable for the recovered amount did not reduce the amount of tax 
    imposed by this chapter.

      (3) Exception for investment tax credit and foreign tax 
                                   credit

        This subsection shall not apply with respect to the credit 
    determined under section 46 and the foreign tax credit.

(c) Treatment of carryovers

    For purposes of this section, an increase in a carryover which has 
not expired before the beginning of the taxable year in which the 
recovery or adjustment takes place shall be treated as reducing tax 
imposed by this chapter.

(d) Special rules for accumulated earnings tax and for personal holding 
        company tax

    In applying subsection (a) for the purpose of determining the 
accumulated earnings tax under section 531 or the tax under section 541 
(relating to personal holding companies)--
        (1) any excluded amount under subsection (a) allowed for the 
    purposes of this subtitle (other than section 531 or section 541) 
    shall be allowed whether or not such amount resulted in a reduction 
    of the tax under section 531 or the tax under section 541 for the 
    prior taxable year; and
        (2) where any excluded amount under subsection (a) was not 
    allowable as a deduction for the prior taxable year for purposes of 
    this subtitle other than of section 531 or section 541 but was 
    allowable for the same taxable year under section 531 or section 
    541, then such excluded amount shall be allowable if it did not 
    result in a reduction of the tax under section 531 or the tax under 
    section 541.

(Aug. 16, 1954, ch. 736, 68A Stat. 33; Pub. L. 94-455, title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96-589, 
Sec. 2(c), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 98-369, div. A, title 
I, Sec. 171(a), July 18, 1984, 98 Stat. 698; Pub. L. 99-514, title 
XVIII, Sec. 1812(a)(1), (2), Oct. 22, 1986, 100 Stat. 2833.)


                               Amendments

    1986--Subsec. (a). Pub. L. 99-514, Sec. 1812(a)(1), substituted 
``did not reduce the amount of tax imposed by this chapter'' for ``did 
not reduce income subject to tax''.
    Subsec. (c). Pub. L. 99-514, Sec. 1812(a)(2), substituted ``reducing 
tax imposed by this chapter'' for ``reducing income subject to tax or 
reducing tax imposed by this chapter, as the case may be''.
    1984--Pub. L. 98-369 amended section generally, substituting 
provisions relating to recovery of tax benefit items for provisions 
relating to recovery of bad debts, prior taxes, and delinquency amounts.
    1980--Subsec. (d). Pub. L. 96-589 added subsec. (d).
    1976--Subsec. (b)(4). Pub. L. 94-455 struck out ``or his delegate'' 
after ``Secretary''.


                    Effective Date of 1986 Amendment

    Amendment by 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.


                    Effective Date of 1984 Amendment

    Section 171(c) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section] shall apply to amounts 
recovered after December 31, 1983, in taxable years ending after such 
date.''


                    Effective Date of 1980 Amendment

    Amendment by Pub. L. 96-589 applicable to transactions which occur 
after Dec. 31, 1980, other than transactions which occur in a proceeding 
in a bankruptcy case or similar judicial proceeding or in a proceeding 
under Title 11 commencing on or after Dec. 31, 1980, with an exception 
permitting the debtor to make the amendment applicable to transactions 
occurring after Sept. 30, 1979, in a specified manner, see section 
7(a)(1), (f) of Pub. L. 96-589, set out as a note under section 108 of 
this title.


           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 [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 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.

                  Section Referred to in Other Sections

    This section is referred to in sections 381, 1351, 1398 of this 
title.
