
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 665(a),]
[Document affected by Public Law 107-16 Section 665(c)]
[CITE: 26USC132]

 
                     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. 132. Certain fringe benefits


(a) Exclusion from gross income

    Gross income shall not include any fringe benefit which qualifies as 
a--
        (1) no-additional-cost service,
        (2) qualified employee discount,
        (3) working condition fringe,
        (4) de minimis fringe,
        (5) qualified transportation fringe, or
        (6) qualified moving expense reimbursement.

(b) No-additional-cost service defined

    For purposes of this section, the term ``no-additional-cost 
service'' means any service provided by an employer to an employee for 
use by such employee if--
        (1) such service is offered for sale to customers in the 
    ordinary course of the line of business of the employer in which the 
    employee is performing services, and
        (2) the employer incurs no substantial additional cost 
    (including forgone revenue) in providing such service to the 
    employee (determined without regard to any amount paid by the 
    employee for such service).

(c) Qualified employee discount defined

    For purposes of this section--

                   (1) Qualified employee discount

        The term ``qualified employee discount'' means any employee 
    discount with respect to qualified property or services to the 
    extent such discount does not exceed--
            (A) in the case of property, the gross profit percentage of 
        the price at which the property is being offered by the employer 
        to customers, or
            (B) in the case of services, 20 percent of the price at 
        which the services are being offered by the employer to 
        customers.

                     (2) Gross profit percentage

        (A) In general

            The term ``gross profit percentage'' means the percent 
        which--
                (i) the excess of the aggregate sales price of property 
            sold by the employer to customers over the aggregate cost of 
            such property to the employer, is of
                (ii) the aggregate sale price of such property.

        (B) Determination of gross profit percentage

            Gross profit percentage shall be determined on the basis 
        of--
                (i) all property offered to customers in the ordinary 
            course of the line of business of the employer in which the 
            employee is performing services (or a reasonable 
            classification of property selected by the employer), and
                (ii) the employer's experience during a representative 
            period.

                    (3) Employee discount defined

        The term ``employee discount'' means the amount by which--
            (A) the price at which the property or services are provided 
        by the employer to an employee for use by such employee, is less 
        than
            (B) the price at which such property or services are being 
        offered by the employer to customers.

                 (4) Qualified property or services

        The term ``qualified property or services'' means any property 
    (other than real property and other than personal property of a kind 
    held for investment) or services which are offered for sale to 
    customers in the ordinary course of the line of business of the 
    employer in which the employee is peforming \1\ services.
---------------------------------------------------------------------------
    \1\ So in original. Probably should be ``performing''.
---------------------------------------------------------------------------

(d) Working condition fringe defined

    For purposes of this section, the term ``working condition fringe'' 
means any property or services provided to an employee of the employer 
to the extent that, if the employee paid for such property or services, 
such payment would be allowable as a deduction under section 162 or 167.

(e) De minimis fringe defined

    For purposes of this section--

                           (1) In general

        The term ``de minimis fringe'' means any property or service the 
    value of which is (after taking into account the frequency with 
    which similar fringes are provided by the employer to the employer's 
    employees) so small as to make accounting for it unreasonable or 
    administratively impracticable.

             (2) Treatment of certain eating facilities

        The operation by an employer of any eating facility for 
    employees shall be treated as a de minimis fringe if--
            (A) such facility is located on or near the business 
        premises of the employer, and
            (B) revenue derived from such facility normally equals or 
        exceeds the direct operating costs of such facility.

    The preceding sentence shall apply with respect to any highly 
    compensated employee only if access to the facility is available on 
    substantially the same terms to each member of a group of employees 
    which is defined under a reasonable classification set up by the 
    employer which does not discriminate in favor of highly compensated 
    employees. For purposes of subparagraph (B), an employee entitled 
    under section 119 to exclude the value of a meal provided at such 
    facility shall be treated as having paid an amount for such meal 
    equal to the direct operating costs of the facility attributable to 
    such meal.

(f) Qualified transportation fringe

                           (1) In general

        For purposes of this section, the term ``qualified 
    transportation fringe'' means any of the following provided by an 
    employer to an employee:
            (A) Transportation in a commuter highway vehicle if such 
        transportation is in connection with travel between the 
        employee's residence and place of employment.
            (B) Any transit pass.
            (C) Qualified parking.

                     (2) Limitation on exclusion

        The amount of the fringe benefits which are provided by an 
    employer to any employee and which may be excluded from gross income 
    under subsection (a)(5) shall not exceed--
            (A) $65 per month in the case of the aggregate of the 
        benefits described in subparagraphs (A) and (B) of paragraph 
        (1), and
            (B) $175 per month in the case of qualified parking.

                       (3) Cash reimbursements

        For purposes of this subsection, the term ``qualified 
    transportation fringe'' includes a cash reimbursement by an employer 
    to an employee for a benefit described in paragraph (1). The 
    preceding sentence shall apply to a cash reimbursement for any 
    transit pass only if a voucher or similar item which may be 
    exchanged only for a transit pass is not readily available for 
    direct distribution by the employer to the employee.

                     (4) No constructive receipt

        No amount shall be included in the gross income of an employee 
    solely because the employee may choose between any qualified 
    transportation fringe and compensation which would otherwise be 
    includible in gross income of such employee.

                           (5) Definitions

        For purposes of this subsection--

        (A) Transit pass

            The term ``transit pass'' means any pass, token, farecard, 
        voucher, or similar item entitling a person to transportation 
        (or transportation at a reduced price) if such transportation 
        is--
                (i) on mass transit facilities (whether or not publicly 
            owned), or
                (ii) provided by any person in the business of 
            transporting persons for compensation or hire if such 
            transportation is provided in a vehicle meeting the 
            requirements of subparagraph (B)(i).

        (B) Commuter highway vehicle

            The term ``commuter highway vehicle'' means any highway 
        vehicle--
                (i) the seating capacity of which is at least 6 adults 
            (not including the driver), and
                (ii) at least 80 percent of the mileage use of which can 
            reasonably be expected to be--
                    (I) for purposes of transporting employees in 
                connection with travel between their residences and 
                their place of employment, and
                    (II) on trips during which the number of employees 
                transported for such purposes is at least \1/2\ of the 
                adult seating capacity of such vehicle (not including 
                the driver).

        (C) Qualified parking

            The term ``qualified parking'' means parking provided to an 
        employee on or near the business premises of the employer or on 
        or near a location from which the employee commutes to work by 
        transportation described in subparagraph (A), in a commuter 
        highway vehicle, or by carpool. Such term shall not include any 
        parking on or near property used by the employee for residential 
        purposes.

        (D) Transportation provided by employer

            Transportation referred to in paragraph (1)(A) shall be 
        considered to be provided by an employer if such transportation 
        is furnished in a commuter highway vehicle operated by or for 
        the employer.

        (E) Employee

            For purposes of this subsection, the term ``employee'' does 
        not include an individual who is an employee within the meaning 
        of section 401(c)(1).

                      (6) Inflation adjustment

        (A) In general

            In the case of any taxable year beginning in a calendar year 
        after 1999, the dollar amounts contained in subparagraphs (A) 
        and (B) of paragraph (2) shall be increased by an amount equal 
        to--
                (i) such dollar amount, multiplied by
                (ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, by substituting ``calendar year 1998'' for 
            ``calendar year 1992''.

        (B) Rounding

            If any increase determined under subparagraph (A) is not a 
        multiple of $5, such increase shall be rounded to the next 
        lowest multiple of $5.

               (7) Coordination with other provisions

        For purposes of this section, the terms ``working condition 
    fringe'' and ``de minimis fringe'' shall not include any qualified 
    transportation fringe (determined without regard to paragraph (2)).

(g) Qualified moving expense reimbursement

    For purposes of this section, the term ``qualified moving expense 
reimbursement'' means any amount received (directly or indirectly) by an 
individual from an employer as a payment for (or a reimbursement of) 
expenses which would be deductible as moving expenses under section 217 
if directly paid or incurred by the individual. Such term shall not 
include any payment for (or reimbursement of) an expense actually 
deducted by the individual in a prior taxable year.

(h) Certain individuals treated as employees for purposes of subsections 
        (a)(1) and (2)

    For purposes of paragraphs (1) and (2) of subsection (a)--

     (1) Retired and disabled employees and surviving spouse of 
                        employee treated as employee

        With respect to a line of business of an employer, the term 
    ``employee'' includes--
            (A) any individual who was formerly employed by such 
        employer in such line of business and who separated from service 
        with such employer in such line of business by reason of 
        retirement or disability, and
            (B) any widow or widower of any individual who died while 
        employed by such employer in such line of business or while an 
        employee within the meaning of subparagraph (A).

                  (2) Spouse and dependent children

        (A) In general

            Any use by the spouse or a dependent child of the employee 
        shall be treated as use by the employee.

        (B) Dependent child

            For purposes of subparagraph (A), the term ``dependent 
        child'' means any child (as defined in section 151(c)(3)) of the 
        employee--
                (i) who is a dependent of the employee, or
                (ii) both of whose parents are deceased and who has not 
            attained age 25.

        For purposes of the preceding sentence, any child to whom 
        section 152(e) applies shall be treated as the dependent of both 
        parents.

          (3) Special rule for parents in the case of air 
                               transportation

        Any use of air transportation by a parent of an employee 
    (determined without regard to paragraph (1)(B)) shall be treated as 
    use by the employee.

(i) Reciprocal agreements

    For purposes of paragraph (1) of subsection (a), any service 
provided by an employer to an employee of another employer shall be 
treated as provided by the employer of such employee if--
        (1) such service is provided pursuant to a written agreement 
    between such employers, and
        (2) neither of such employers incurs any substantial additional 
    costs (including foregone revenue) in providing such service or 
    pursuant to such agreement.

(j) Special rules

      (1) Exclusions under subsection (a)(1) and (2) apply to 
                  highly compensated employees only if no 
                               discrimination

        Paragraphs (1) and (2) of subsection (a) shall apply with 
    respect to any fringe benefit described therein provided with 
    respect to any highly compensated employee only if such fringe 
    benefit is available on substantially the same terms to each member 
    of a group of employees which is defined under a reasonable 
    classification set up by the employer which does not discriminate in 
    favor of highly compensated employees.

      (2) Special rule for leased sections of department stores

        (A) In general

            For purposes of paragraph (2) of subsection (a), in the case 
        of a leased section of a department store--
                (i) such section shall be treated as part of the line of 
            business of the person operating the department store, and
                (ii) employees in the leased section shall be treated as 
            employees of the person operating the department store.

        (B) Leased section of department store

            For purposes of subparagraph (A), a leased section of a 
        department store is any part of a department store where over-
        the-counter sales of property are made under a lease or similar 
        arrangement where it appears to the general public that 
        individuals making such sales are employed by the person 
        operating the department store.

                          (3) Auto salesmen

        (A) In general

            For purposes of subsection (a)(3), qualified automobile 
        demonstration use shall be treated as a working condition 
        fringe.

        (B) Qualified automobile demonstration use

            For purposes of subparagraph (A), the term ``qualified 
        automobile demonstration use'' means any use of an automobile by 
        a full-time automobile salesman in the sales area in which the 
        automobile dealer's sales office is located if--
                (i) such use is provided primarily to facilitate the 
            salesman's performance of services for the employer, and
                (ii) there are substantial restrictions on the personal 
            use of such automobile by such salesman.

         (4) On-premises gyms and other athletic facilities

        (A) In general

            Gross income shall not include the value of any on-premises 
        athletic facility provided by an employer to his employees.

        (B) On-premises athletic facility

            For purposes of this paragraph, the term ``on-premises 
        athletic facility'' means any gym or other athletic facility--
                (i) which is located on the premises of the employer,
                (ii) which is operated by the employer, and
                (iii) substantially all the use of which is by employees 
            of the employer, their spouses, and their dependent children 
            (within the meaning of subsection (h)).

             (5) Special rule for affiliates of airlines

        (A) In general

            If--
                (i) a qualified affiliate is a member of an affiliated 
            group another member of which operates an airline, and
                (ii) employees of the qualified affiliate who are 
            directly engaged in providing airline-related services are 
            entitled to no-additional-cost service with respect to air 
            transportation provided by such other member,

        then, for purposes of applying paragraph (1) of subsection (a) 
        to such no-additional-cost service provided to such employees, 
        such qualified affiliate shall be treated as engaged in the same 
        line of business as such other member.

        (B) Qualified affiliate

            For purposes of this paragraph, the term ``qualified 
        affiliate'' means any corporation which is predominantly engaged 
        in airline-related services.

        (C) Airline-related services

            For purposes of this paragraph, the term ``airline-related 
        services'' means any of the following services provided in 
        connection with air transportation:
                (i) Catering.
                (ii) Baggage handling.
                (iii) Ticketing and reservations.
                (iv) Flight planning and weather analysis.
                (v) Restaurants and gift shops located at an airport.
                (vi) Such other similar services provided to the airline 
            as the Secretary may prescribe.

        (D) Affiliated group

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

                   (6) Highly compensated employee

        For purposes of this section, the term ``highly compensated 
    employee'' has the meaning given such term by section 414(q).

                            (7) Air cargo

        For purposes of subsection (b), the transportation of cargo by 
    air and the transportation of passengers by air shall be treated as 
    the same service.

    (8) Application of section to otherwise taxable educational 
                            or training benefits

        Amounts paid or expenses incurred by the employer for education 
    or training provided to the employee which are not excludable from 
    gross income under section 127 shall be excluded from gross income 
    under this section if (and only if) such amounts or expenses are a 
    working condition fringe.

(k) Customers not to include employees

    For purposes of this section (other than subsection (c)(2)), the 
term ``customers'' shall only include customers who are not employees.

(l) Section not to apply to fringe benefits expressly provided for 
        elsewhere

    This section (other than subsections (e) and (g)) shall not apply to 
any fringe benefits of a type the tax treatment of which is expressly 
provided for in any other section of this chapter.

(m) Regulations

    The Secretary shall prescribe such regulations as may be necessary 
or appropriate to carry out the purposes of this section.

(Added Pub. L. 98-369, div. A, title V, Sec. 531(a)(1), July 18, 1984, 
98 Stat. 877; amended Pub. L. 99-272, title XIII, Sec. 13207(a)(1), 
(b)(1), Apr. 7, 1986, 100 Stat. 319; Pub. L. 99-514, title XI, 
Secs. 1114(b)(5), 1151(e)(2)(A), (g)(5), title XVIII, Secs. 1853(a), 
1899A(5), Oct. 22, 1986, 100 Stat. 2451, 2506, 2507, 2870, 2958; Pub. L. 
100-647, title I, Sec. 1011B(a)(31)(B), title VI, Sec. 6066(a), Nov. 10, 
1988, 102 Stat. 3488, 3702; Pub. L. 101-140, title II, Sec. 203(a)(1), 
(2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title VII, 
Secs. 7101(b), 7841(d)(7), (19), Dec. 19, 1989, 103 Stat. 2304, 2428, 
2429; Pub. L. 102-486, title XIX, Sec. 1911(a)-(c), Oct. 24, 1992, 106 
Stat. 3012-3014; Pub. L. 103-66, title XIII, Secs. 13101(b), 
13201(b)(3)(F), 13213(d)(1), (2), (3)(B), (C), Aug. 10, 1993, 107 Stat. 
420, 459, 474; Pub. L. 105-34, title IX, Sec. 970(a), title X, 
Sec. 1072(a), Aug. 5, 1997, 111 Stat. 897, 948; Pub. L. 105-178, title 
IX, Sec. 9010(a)(1), (b)(1), (2), (c)(1), (2), June 9, 1998, 112 Stat. 
507, 508.)

  Qualified Transportation Fringe Benefit Exclusion Adjustment for Tax 
                         Years Beginning in 2001

        For adjustment of qualified transportation fringe benefit 
    exclusion amount under this section for tax years beginning in 2001, 
    see section 3.07 of Revenue Procedure 2001-13, set out as a note 
    under section 1 of this title.

                       Amendment of Subsection (f)

        Pub. L. 105-178, title IX, Sec. 9010(c), June 9, 1998, 112 Stat. 
    508, provided that, applicable to taxable years beginning after Dec. 
    31, 2001, subsection (f)(2)(A) of this section is amended by 
    substituting ``$100'' for ``$65'' and subsection (f)(6)(A) of this 
    section is amended by inserting flush sentence at end reading as 
    follows: ``In the case of any taxable year beginning in a calendar 
    year after 2002, clause (ii) shall be applied by substituting 
    `calendar year 2001' for `calendar year 1998' for purposes of 
    adjusting the dollar amount contained in paragraph (2)(A).''


                            Prior Provisions

    A prior section 132 was renumbered section 139 of this title.


                               Amendments

    1998--Subsec. (f)(2)(A). Pub. L. 105-178, Sec. 9010(b)(2)(A), 
substituted ``$65'' for ``$60''.
    Subsec. (f)(2)(B). Pub. L. 105-178, Sec. 9010(b)(2)(B), substituted 
``$175'' for ``$155''.
    Subsec. (f)(4). Pub. L. 105-178, Sec. 9010(a)(1), amended heading 
and text of par. (4) generally. Prior to amendment, text read as 
follows: ``Subsection (a)(5) shall not apply to any qualified 
transportation fringe unless such benefit is provided in addition to 
(and not in lieu of) any compensation otherwise payable to the employee. 
This paragraph shall not apply to any qualified parking provided in lieu 
of compensation which otherwise would have been includible in gross 
income of the employee, and no amount shall be included in the gross 
income of the employee solely because the employee may choose between 
the qualified parking and compensation.''
    Subsec. (f)(6). Pub. L. 105-178, Sec. 9010(b)(1), reenacted heading 
without change and amended text generally. Prior to amendment, text read 
as follows: ``In the case of any taxable year beginning in a calendar 
year after 1993, the dollar amounts contained in paragraph (2)(A) and 
(B) shall be increased by an amount equal to--
        ``(A) such dollar amount, multiplied by
        ``(B) the cost-of-living adjustment determined under section 
    1(f)(3) for the calendar year in which the taxable year begins.
If any increase determined under the preceding sentence is not a 
multiple of $5, such increase shall be rounded to the next lowest 
multiple of $5.''
    1997--Subsec. (e)(2). Pub. L. 105-34, Sec. 970(a), inserted at end 
of concluding provisions ``For purposes of subparagraph (B), an employee 
entitled under section 119 to exclude the value of a meal provided at 
such facility shall be treated as having paid an amount for such meal 
equal to the direct operating costs of the facility attributable to such 
meal.''
    Subsec. (f)(4). Pub. L. 105-34, Sec. 1072(a), inserted at end ``This 
paragraph shall not apply to any qualified parking provided in lieu of 
compensation which otherwise would have been includible in gross income 
of the employee, and no amount shall be included in the gross income of 
the employee solely because the employee may choose between the 
qualified parking and compensation.''
    1993--Subsec. (a)(6). Pub. L. 103-66, Sec. 13213(d)(1), added par. 
(6).
    Subsec. (f)(6)(B). Pub. L. 103-66, Sec. 13201(b)(3)(F), struck out 
before period at end ``, determined by substituting `calendar year 1992' 
for `calendar year 1989' in subparagraph (B) thereof''.
    Subsecs. (g), (h). Pub. L. 103-66, Sec. 13213(d)(2), added subsec. 
(g) and redesignated former subsec. (g) as (h). Former subsec. (h) 
redesignated (i).
    Subsec. (i). Pub. L. 103-66, Sec. 13213(d)(2), redesignated subsec. 
(h) as (i). Former subsec. (i) redesignated (j).
    Subsec. (i)(8). Pub. L. 103-66, Sec. 13101(b), amended heading and 
text of par. (8) generally. Prior to amendment, text read as follows: 
``Amounts which would be excludible from gross income under section 127 
but for subsection (a)(2) thereof or the last sentence of subsection 
(c)(1) thereof shall be excluded from gross income under this section if 
(and only if) such amounts are a working condition fringe.''
    Subsec. (j). Pub. L. 103-66, Sec. 13213(d)(2), redesignated subsec. 
(i) as (j). Former subsec. (j) redesignated (k).
    Subsec. (j)(4)(B)(iii). Pub. L. 103-66, Sec. 13213(d)(3)(B), 
substituted ``subsection (h)'' for ``subsection (f)''.
    Subsec. (k). Pub. L. 103-66, Sec. 13213(d)(2), redesignated subsec. 
(j) as (k). Former subsec. (k) redesignated (l).
    Subsec. (l). Pub. L. 103-66, Sec. 13213(d)(2), (3)(C), redesignated 
subsec. (k) as (l) and substituted ``subsections (e) and (g)'' for 
``subsection (e)''. Former subsec. (l) redesignated (m).
    Subsec. (m). Pub. L. 103-66, Sec. 13213(d)(2), redesignated subsec. 
(l) as (m).
    1992--Subsec. (a)(5). Pub. L. 102-486, Sec. 1911(a), added par. (5).
    Subsecs. (f) to (h). Pub. L. 102-486, Sec. 1911(b), added subsec. 
(f) and redesignated former subsecs. (f) and (g) as (g) and (h), 
respectively. Former subsec. (h) redesignated (i).
    Subsec. (i). Pub. L. 102-486, Sec. 1911(b), (c), redesignated 
subsec. (h) as (i), redesignated pars. (5) to (9) as (4) to (8), 
respectively, and struck out former par. (4), ``Parking'', which read as 
follows: ``The term `working condition fringe' includes parking provided 
to an employee on or near the business premises of the employer.'' 
Former subsec. (i) redesignated (j).
    Subsecs. (j) to (l). Pub. L. 102-486, Sec. 1911(b), redesignated 
subsecs. (i) to (k) as (j) to (l), respectively.
    1989--Subsec. (f)(2)(B). Pub. L. 101-239, Sec. 7841(d)(19), 
substituted ``section 151(c)(3)'' for ``section 151(e)(3)'' in 
introductory provisions.
    Subsec. (h)(1). Pub. L. 101-239, Sec. 7841(d)(7), substituted ``to 
highly compensated employees'' for ``to officers, etc.,'' in heading.
    Pub. L. 101-140, Sec. 203(a)(2), amended par. (1) to read as if 
amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B), had not been 
enacted, see 1988 Amendment note below.
    Pub. L. 101-140, Sec. 203(a)(1), amended par. (1) to read as if 
amendments by Pub. L. 99-514, Sec. 1151(g)(5), had not been enacted, see 
1986 Amendment note below.
    Subsec. (h)(9). Pub. L. 101-239, Sec. 7101(b), added par. (9).
    1988--Subsec. (h)(1). Pub. L. 100-647, Sec. 1011B(a)(31)(B), 
substituted ``there shall'' for ``there may be'' and ``who are'' for 
``who may be'' in last sentence.
    Subsec. (h)(8). Pub. L. 100-647, Sec. 6066(a), added par. (8).
    1986--Subsec. (c)(3)(A). Pub. L. 99-514, Sec. 1853(a)(2), 
substituted ``are provided by the employer to an employee for use by 
such employee'' for ``are provided to the employee by the employer''.
    Subsec. (e)(2). Pub. L. 99-514, Sec. 1114(b)(5)(A), struck out 
``officer, owner, or'' before ``highly compensated employee'' and 
``officers, owners, or'' before ``highly compensated employees'' in last 
sentence.
    Subsec. (f)(2)(B)(ii). Pub. L. 99-514, Sec. 1853(a)(1), substituted 
``are deceased and who has not attained age 25'' for ``are deceased''.
    Subsec. (f)(3). Pub. L. 99-272, Sec. 13207(a)(1), added par. (3).
    Subsec. (g). Pub. L. 99-514, Sec. 1151(e)(2)(A), in amending subsec. 
(g) generally, designated par. (2) as the entire subsection, struck out 
former subsec. heading, ``Special rules relating to employer'', struck 
out ``For purposes of this section--'', and struck out par. (1) which 
read as follows: ``All employees treated as employed by a single 
employer under subsection (b), (c), or (m) of section 414 shall be 
treated as employed by a single employer for purposes of this section.''
    Subsec. (h)(1). Pub. L. 99-514, Sec. 1151(g)(5), inserted ``For 
purposes of this paragraph and subsection (e), there may be excluded 
from consideration employees who may be excluded from consideration 
under section 89(h).''
    Pub. L. 99-514, Sec. 1114(b)(5)(A), struck out ``officer, owner, 
or'' before ``highly compensated employee'' and ``officers, owners, or'' 
before ``highly compensated employees''.
    Subsec. (h)(3)(B)(i). Pub. L. 99-514, Sec. 1899A(5), substituted 
``such use is'' for ``such use in''.
    Subsec. (h)(6). Pub. L. 99-272, Sec. 13207(b)(1), added par. (6).
    Subsec. (h)(7). Pub. L. 99-514, Sec. 1114(b)(5)(B), added par. (7).
    Subsec. (i). Pub. L. 99-514, Sec. 1853(a)(3), substituted 
``subsection (c)(2)'' for ``subsection (c)(2)(B)''.


                    Effective Date of 1998 Amendment

    Pub. L. 105-178, title IX, Sec. 9010(a)(2), June 9, 1998, 112 Stat. 
507, provided that: ``The amendment made by this subsection [amending 
this section] shall apply to taxable years beginning after December 31, 
1997.''
    Pub. L. 105-178, title IX, Sec. 9010(b)(3), June 9, 1998, 112 Stat. 
508, provided that: ``The amendments made by this subsection [amending 
this section] shall apply to taxable years beginning after December 31, 
1998.''
    Pub. L. 105-178, title IX, Sec. 9010(c)(3), June 9, 1998, 112 Stat. 
508, provided that: ``The amendments made by this subsection [amending 
this section] shall apply to taxable years beginning after December 31, 
2001.''


                    Effective Date of 1997 Amendment

    Section 970(b) of Pub. L. 105-34 provided that: ``The amendment made 
by this section [amending this section] shall apply to taxable years 
beginning after December 31, 1997.''
    Section 1072(b) of Pub. L. 105-34 provided that: ``The amendment 
made by this section [amending this section] shall apply to taxable 
years beginning after December 31, 1997.''


                    Effective Date of 1993 Amendment

    Section 13101(c)(2) of Pub. L. 103-66 provided that: ``The amendment 
made by subsection (b) [amending this section] shall apply to taxable 
years beginning after December 31, 1988.''
    Amendment by section 13201(b)(3)(F) of Pub. L. 103-66 applicable to 
taxable years beginning after Dec. 31, 1992, see section 13201(c) of 
Pub. L. 103-66, set out as a note under section 1 of this title.
    Amendment by section 13213(d)(1), (2), (3)(B) and (C) of Pub. L. 
103-66 applicable to reimbursements or other payments in respect of 
expenses incurred after Dec. 31, 1993, see section 13213(e) of Pub. L. 
103-66, set out as a note under section 62 of this title.


                    Effective Date of 1992 Amendment

    Section 1911(d) of Pub. L. 102-486 provided that: ``The amendments 
made by this section [amending this section] shall apply to benefits 
provided after December 31, 1992.''


                    Effective Date of 1989 Amendments

    Amendment by section 7101(b) of Pub. L. 101-239 applicable to 
taxable years beginning after Dec. 31, 1988, see section 7101(c) of Pub. 
L. 101-239, set out as a note under section 127 of this title.
    Amendment by Pub. L. 101-140 effective as if included in section 
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set out 
as a note under section 79 of this title.


                    Effective Date of 1988 Amendment

    Amendment by section 1011B(a)(31)(B) of 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.
    Section 6066(b) of Pub. L. 100-647 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to 
transportation furnished after December 31, 1987, in taxable years 
ending after such date.''


                    Effective Date of 1986 Amendments

    Amendment by section 1114(b)(5) of Pub. L. 99-514 applicable to 
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub. L. 
99-514, set out as a note under section 414 of this title.
    Amendment by section 1151(e)(2)(A), (g)(5) of Pub. L. 99-514 
applicable, with certain qualifications and exceptions, to years 
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L. 99-514, as 
amended, set out as a note under section 79 of this title.
    Amendment by section 1853(a) 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.
    Section 13207(a)(2) of Pub. L. 99-272 provided that: ``The amendment 
made by this subsection [amending this section] shall take effect on 
January 1, 1985.''
    Section 13207(b)(2) of Pub. L. 99-272 provided that: ``The amendment 
made by this subsection [amending this section] shall take effect on 
January 1, 1985.''


                             Effective Date

    Section 531(i) of Pub. L. 98-369, formerly Sec. 531(h), as 
redesignated by Pub. L. 99-272, title XIII, Sec. 13207(d), Apr. 7, 1986, 
100 Stat. 320, provided that: ``The amendments made by this section 
[enacting this section and section 4977 of this title, amending sections 
61, 125, 3121, 3231, 3306, 3401, 3501, and 6652 of this title and 
section 409 of Title 42, The Public Health and Welfare, redesignating 
former section 132 of this title as 133, and enacting provisions set out 
as notes under this section and section 125 of this title] shall take 
effect on January 1, 1985.''


                               Regulations

    Secretary of the Treasury or his delegate to issue before Feb. 1, 
1988, final regulations to carry out amendments made by section 1114 of 
Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out as a note 
under section 401 of this title.


 Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99-514 for 
                            Fiscal Year 1990

    No monies appropriated by Pub. L. 101-136 to be used to implement or 
enforce section 1151 of Pub. L. 99-514 or the amendments made by such 
section, see section 528 of Pub. L. 101-136, set out as a note under 
section 89 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.


                   Certain Recordkeeping Requirements

    Section 1567 of Pub. L. 99-514 provided that:
    ``(a) In General.--For purposes of sections 132 and 274 of the 
Internal Revenue Code of 1954 [now 1986], use of an automobile by a 
special agent of the Internal Revenue Service shall be treated in the 
same manner as use of an automobile by an officer of any other law 
enforcement agency.
    ``(b) Effective Date.--The provisions of this section shall take 
effect on January 1, 1985.''


       Treatment of Certain Leased Operations of Department Stores

    Section 1853(e) of Pub. L. 99-514 provided that: ``For purposes of 
section 132(h)(2)(B) [now 132(j)(2)(B)] of the Internal Revenue Code of 
1954 [now 1986], a leased section of a department store which, in 
connection with the offering of beautician services, customarily makes 
sales of beauty aids in the ordinary course of business shall be treated 
as engaged in over-the-counter sales of property.''


   Transitional Rule for Determination of Line of Business in Case of 
                   Affiliated Group Operating Airline

    Section 13207(c) of Pub. L. 99-272, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``If, as of 
September 12, 1984--
        ``(1) an individual--
            ``(A) was an employee (within the meaning of section 132 of 
        the Internal Revenue Code of 1986 [formerly I.R.C. 1954], 
        including subsection (f) [now (h)] thereof) of one member of an 
        affiliated group (as defined in section 1504 of such Code), 
        hereinafter referred to as the `first corporation', and
            ``(B) was eligible for no-additional-cost service in the 
        form of air transportation provided by another member of such 
        affiliated group, hereinafter referred to as the `second 
        corporation',
        ``(2) at least 50 percent of the individuals performing service 
    for the first corporation were or had been employees of, or had 
    previously performed services for, the second corporation, and
        ``(3) the primary business of the affiliated group was air 
    transportation of passengers,
then, for purposes of applying paragraphs (1) and (2) of section 132(a) 
of the Internal Revenue Code of 1986, with respect to no-additional-cost 
services and qualified employee discounts provided after December 31, 
1984, for such individual by the second corporation, the first 
corporation shall be treated as engaged in the same air transportation 
line of business as the second corporation. For purposes of the 
preceding sentence, an employee of the second corporation who is 
performing services for the first corporation shall also be treated as 
an employee of the first corporation.''


    Special Rule for Services Related To Providing Air Transportation

    Section 531(g) of Pub. L. 98-369, as added by Pub. L. 99-272, title 
XIII, Sec. 13207(d), Apr. 7, 1986, 100 Stat. 320; amended Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(1) In general.--If--
        ``(A) an individual performs services for a qualified air 
    transportation organization, and
        ``(B) such services are performed primarily for persons engaged 
    in providing air transportation and are of the kind which (if 
    performed on September 12, 1984) would qualify such individual for 
    no-additional-cost services in the form of air transportation,
then, with respect to such individual, such qualified air transportation 
organization shall be treated as engaged in the line of business of 
providing air transportation.
    ``(2) Qualified air transportation organization.--For purposes of 
paragraph (1), the term `qualified air transportation organization' 
means any organization--
        ``(A) if such organization (or a predecessor) was in existence 
    on September 12, 1984,
        ``(B) if--
            ``(i) such organization is described in section 501(c)(6) of 
        the Internal Revenue Code of 1986 [formerly I.R.C. 1954] and the 
        membership of such organization is limited to entities engaged 
        in the transportation by air of individuals or property for 
        compensation or hire, or
            ``(ii) such organization is a corporation all the stock of 
        which is owned entirely by entities referred to in clause (i), 
        and
        ``(C) if such organization is operated in furtherance of the 
    activities of its members or owners.''


Determination of Line of Business in Case of Affiliated Group Operating 
                        Retail Department Stores

    Section 531(f) of Pub. L. 98-369, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``If--
        ``(1) as of October 5, 1983, the employees of one member of an 
    affiliated group (as defined in section 1504 of the Internal Revenue 
    Code of 1986 [formerly I.R.C. 1954] without regard to subsections 
    (b)(2) and (b)(4) thereof) were entitled to employee discounts at 
    the retail department stores operated by another member of such 
    affiliated group, and
        ``(2) the primary business of the affiliated group is the 
    operation of retail department stores,
then, for purpose of applying section 132(a)(2) of the Internal Revenue 
Code of 1986, with respect to discounts provided for such employees at 
the retail department stores operated by such other member, the employer 
shall be treated as engaged in the same line of business as such other 
member.''

                  Section Referred to in Other Sections

    This section is referred to in sections 74, 82, 102, 117, 125, 274, 
403, 414, 415, 3121, 3231, 3306, 3401, 4977 of this title; title 5 
section 7905; title 42 section 409.
