
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 107-90 Section 203(b)]
[Document affected by Public Law 107-90 Section 204(a)]
[CITE: 26USC3221]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                      Subtitle C--Employment Taxes
 
                 CHAPTER 22--RAILROAD RETIREMENT TAX ACT
 
                     Subchapter C--Tax on Employers
 
Sec. 3221. Rate of tax


(a) Tier 1 tax

    In addition to other taxes, there is hereby imposed on every 
employer an excise tax, with respect to having individuals in his 
employ, equal to the applicable percentage of compensation paid during 
any calendar year by such employer for services rendered to such 
employer. For purposes of the preceding sentence, the term ``applicable 
percentage'' means the percentage equal to the sum of the rates of tax 
in effect under subsections (a) and (b) of section 3111 for the calendar 
year.

(b) Tier 2 tax

    In addition to other taxes, there is hereby imposed on every 
employer an excise tax, with respect to having individuals in his 
employ, equal to 16.10 percent of the compensation paid during any 
calendar year by such employer for services rendered to such employer.
    (c) In addition to other taxes, there is hereby imposed on every 
employer an excise tax, with respect to having individuals in his 
employ, for each man-hour for which compensation is paid by such 
employer for services rendered to him during any calendar quarter, at 
such rate as will make available sufficient funds to meet the obligation 
to pay supplemental annuities at the level provided under section 3(j) 
of the Railroad Retirement Act of 1937 as in effect on December 31, 1974 
and administrative expenses in connection therewith. For the purpose of 
this subsection, the Railroad Retirement Board is directed to determine 
what rate is required for each calendar quarter. The Railroad Retirement 
Board shall make the determinations provided for not later than fifteen 
days before each calendar quarter. As soon as practicable after each 
determination of the rate, as provided in this subsection, the Railroad 
Retirement Board shall publish a notice in the Federal Register, and 
shall advise all employers, employee representatives, and the Secretary, 
of the rate so determined. With respect to daily, weekly, or monthly 
rates of compensation such tax shall apply to the number of hours 
comprehended in the rate together with the number of overtime hours for 
which compensation in addition to the daily, weekly, or monthly rate is 
paid. With respect to compensation paid on a mileage or piecework basis 
such tax shall apply to the number of hours constituting the hourly 
equivalent of the compensation paid.
    Each employer of employees whose supplemental annuities are reduced 
pursuant to section 3(j)(2) of the Railroad Retirement Act of 1937 or 
section 2(h)(2) of the Railroad Retirement Act of 1974 shall be allowed 
as a credit against the tax imposed by this subsection an amount 
equivalent in each month to the aggregate amount of reductions in 
supplemental annuities accruing in such month to employees of such 
employer. If the credit so allowed to such an employer for any month 
exceeds the tax liability of such employer accruing under this 
subsection in such month, the excess may be carried forward for credit 
against such taxes accruing in subsequent months but the total credit 
allowed by this paragraph to an employer shall not exceed the total of 
the taxes on such employer imposed by this subsection. At the end of 
each calendar quarter the Railroad Retirement Board shall certify to the 
Secretary with respect to each such employer the amount of credit 
accruing to such employer under this paragraph during such quarter and 
shall notify such employer as to the amount so certified.
    (d) Notwithstanding the provisions of subsection (c) of this 
section, the tax imposed by such subsection (c) shall not apply to an 
employer with respect to employees who are covered by a supplemental 
pension plan which is established pursuant to an agreement reached 
through collective bargaining between the employer and employees. There 
is hereby imposed on every such employer an excise tax equal to the 
amount of the supplemental annuity paid to each such employee under 
section 2(b) of the Railroad Retirement Act of 1974, plus a percentage 
thereof determined by the Railroad Retirement Board to be sufficient to 
cover the administrative costs attributable to such payments under 
section 2(b) of such Act.

(e) Cross reference

            For application of different contribution bases with respect 
        to the taxes imposed by subsections (a) and (b), see section 
        3231(e)(2).

(Aug. 16, 1954, ch. 736, 68A Stat. 433; Aug. 31, 1954, ch. 1164, pt. II, 
Sec. 206(a), 68 Stat. 1040; Pub. L. 86-28, pt. II, Sec. 201(d), May 19, 
1959, 73 Stat. 29; Pub. L. 88-133, title II, Sec. 202, Oct. 5, 1963, 77 
Stat. 221; Pub. L. 89-97, title I, Secs. 105(b)(3), 111(c)(3), July 30, 
1965, 79 Stat. 335, 342; Pub. L. 89-212, Secs. 4, 5(c), Sept. 29, 1965, 
79 Stat. 861, 862; Pub. L. 89-699, title III, Sec. 301(c), (e), Oct. 30, 
1966, 80 Stat. 1078; Pub. L. 89-700, title III, Secs. 301(iii), (v), 
(vi), 302, Oct. 30, 1966, 80 Stat. 1088, 1089; Pub. L. 91-215, 
Sec. 5(a), (b)(1), Mar. 17, 1970, 84 Stat. 71; Pub. L. 93-69, title I, 
Sec. 102(d)-(f), July 10, 1973, 87 Stat. 162, 163; Pub. L. 93-445, title 
V, Sec. 501, Oct. 16, 1974, 88 Stat. 1359; Pub. L. 94-93, title II, 
Sec. 203, Aug. 9, 1975, 89 Stat. 466; Pub. L. 94-455, title XIX, 
Secs. 1903(a)(9), 1906(b)(13)(G), Oct. 4, 1976, 90 Stat. 1808, 1835; 
Pub. L. 97-34, title VII, Sec. 741(c), Aug. 13, 1981, 95 Stat. 347; Pub. 
L. 98-76, title II, Secs. 211(b), 222, Aug. 12, 1983, 97 Stat. 419, 420; 
Pub. L. 100-203, title IX, Sec. 9032(a), Dec. 22, 1987, 101 Stat. 1330-
296; Pub. L. 101-508, title V, Sec. 5125(c), Nov. 5, 1990, 104 Stat. 
1388-286.)

                       References in Text

    The Railroad Retirement Act of 1937, referred to in subsec. (c), is 
act Aug. 29, 1935, ch. 812, 49 Stat. 867, as amended generally by act 
June 24, 1937, ch. 382, pt. I, 50 Stat. 307, and which was classified 
principally to subchapter III (Sec. 228a et seq.) of chapter 9 of Title 
45, Railroads. The Railroad Retirement Act of 1937 was amended generally 
and redesignated the Railroad Retirement Act of 1974 by Pub. L. 93-445, 
title I, Oct. 16, 1974, 88 Stat. 1305. The Railroad Retirement Act of 
1974, referred to in subsecs. (c) and (d), is classified generally to 
subchapter IV (Sec. 231 et seq.) of chapter 9 of Title 45. Section 3(j) 
of the Railroad Retirement Act of 1937, referred to in subsec. (c), was 
classified to section 228c(j) of Title 45. Section 2(b) of the Railroad 
Retirement Act of 1974, referred to in subsec. (d), and section 2(h)(2) 
of the Railroad Retirement Act of 1974, referred to in subsec. (c), was 
classified to section 231a(b) and (h)(2) of Title 45. For complete 
classification of these Acts to the Code, see Tables.


                               Amendments

    1990--Subsec. (a). Pub. L. 101-508 substituted ``applicable'' for 
``following'' before ``percentage of'' and provision defining 
``applicable percentage'' for provision specifying the tax rate to be 
7.05 percent, 7.15 percent, 7.51 percent, and 7.65 percent in the case 
of compensation paid during 1985, 1986 or 1987, 1988 or 1989, or 1990 or 
thereafter, respectively.
    1987--Subsec. (b). Pub. L. 100-203 amended subsec. (b) generally. 
Prior to amendment, subsec. (b) read as follows: ``In addition to other 
taxes, there is hereby imposed on every employer an excise tax, with 
respect to having individuals in his employ, equal to the following 
percentage of compensation paid during any calendar year by such 
employer for services rendered to such employer:

  ``In the case of compensation
    paid during:                                      The rate shall be:
            1985................................                 13.75  
            1986 or thereafter..................                14.75.''

    1983--Subsec. (a). Pub. L. 98-76, Sec. 222(a), in amending subsec. 
(a) generally, substituted provisions imposing an excise tax on 
employers, with respect to having individuals in his employ, equal to a 
percentage of compensation paid as set out in an accompanying table, for 
provisions which imposed an excise tax on employers, with respect to 
having individuals in his employ, equal to 12.75 percent of so much of 
the compensation paid in any calendar month by such employer for 
services rendered to him as was not in excess of an amount equal to one-
twelfth of the current maximum annual taxable ``wages'' as defined in 
section 3121 for any month, with certain exceptions dealing with 
multiple employers.
    Pub. L. 98-76, Sec. 211(b), substituted ``12.75 percent'' for 
``11.75 percent''.
    Subsec. (b). Pub. L. 98-76, Sec. 222(a), in amending subsec. (b) 
generally, substituted provisions imposing a second tier excise tax on 
employers equal to a percentage of compensation paid as set out in an 
accompanying table, for provisions that the rate of tax imposed by 
former subsec. (a) would be increased by the rate of tax imposed with 
respect to wages by section 3111(a) plus the rate imposed by section 
3111(b).
    Subsec. (e). Pub. L. 98-76, Sec. 222(b), added subsec. (e).
    1981--Subsec. (a). Pub. L. 97-34 substituted in first sentence 
``11.75'' for ``9.5''.
    1976--Subsec. (a). Pub. L. 94-455, Secs. 1903(a)(9)(A), 
1906(b)(13)(G), struck out provisions relating to the September 30, 1973 
qualification on the applicability of provisions of this subsection, 
``of the Internal Revenue Code of 1954'' after ``as defined in section 
3121'' wherever appearing, and ``of the Treasury'' after ``to the 
Secretary''.
    Subsec. (b). Pub. L. 94-455, Sec. 1903(a)(9)(B), struck out ``, with 
respect to compensation paid for services rendered after September 30, 
1973,'' after ``shall be increased'', ``of the Internal Revenue Code of 
1954'' after ``by section 3111(a)'' and ``of such Code'' after ``by 
section 3111(b)''.
    Subsec. (c). Pub. L. 94-455, Secs. 1903(a)(9)(C), 1906(b)(13)(G), 
struck out ``(1) at the rate of two cents for the period beginning 
November 1, 1966, and ending March 31, 1970, and (2) commencing April 1, 
1970,'' after ``during any calendar quarter,'' , ``commencing with the 
quarter beginning April 1, 1970'' after ``required for each calendar 
quarter'', ``of the Treasury'' after ``representatives, and the 
Secretary'' and ``of the Treasury'' after ``shall certify to the 
Secretary''.
    1975--Subsec. (a). Pub. L. 94-93 substituted ``compensation paid in 
any calendar month by such employer'' for ``compensation paid by such 
employer''.
    1974--Subsec. (c). Pub. L. 93-445, Sec. 501(a), struck out ``for 
appropriation to the Railroad Retirement Supplemental Account provided 
for in section 15(b) of the Railroad Retirement Act of 1937'' after 
``commencing April 1, 1970, at such rate as will make available'', 
substituted ``at the level provided under section 3(j) of the Railroad 
Retirement Act of 1937 as in effect on December 31, 1974'' for ``under 
section 3(j) of such Act'', and inserted ``or section 2(h)(2) of the 
Railroad Retirement Act of 1974'' after ``section 3(j)(2) of the 
Railroad Retirement Act of 1937''.
    Subsec. (d). Pub. L. 93-445, Sec. 501(b), substituted ``section 2(b) 
of the Railroad Retirement Act of 1974'' for ``section 3(j) of the 
Railroad Retirement Act of 1937'' and ``section 2(b) of such Act'' for 
``section 3(j) of such Act''.
    1973--Subsec. (a). Pub. L. 93-69, Sec. 102(d), (e), substituted new 
tax rate provisions on employers for services rendered after Sept. 30, 
1973, for former provisions which prescribed 6\1/4\, 6\1/2\, 7, 7\1/4\, 
and 7\1/2\ percent on income for services rendered after Sept. 30, 1965; 
Dec. 31, 1965; Dec. 31, 1966; Dec. 31, 1967; and Dec. 31, 1968, 
respectively, as is, with respect to any employee for any calendar 
month, not in excess of (i) $450, or (ii) an amount equal to one-twelfth 
of the current maximum annual taxable ``wages'' as defined in section 
3121 of the Internal Revenue Code of 1954, whichever is greater, for any 
month after Sept. 30, 1965, and, in first sentence, substituted ``1973'' 
for ``1965'' wherever appearing, struck out ``(i) $450, or (ii)'' before 
``an amount equal to'' in two places, and struck out ``, whichever is 
greater,'' after ``Internal Revenue Code of 1954'' in two places, 
respectively.
    Subsec. (b). Pub. L. 93-69, Sec. 102(f), substituted ``1973'' for 
``1965'' and ``by the rate of tax imposed with respect to wages by 
section 3111(a) of the Internal Revenue Code of 1954 plus the rate 
imposed by section 3111(b) of such Code'', for ``by a number of 
percentage points (including fractional points) equal at any given time 
to the number of percentage points (including fractional points) by 
which the rate of the tax imposed with respect to wages by section 
3111(a) plus the rate imposed by section 3111(b) at such time exceeds 
2\3/4\ percent (the rate provided by paragraph (2) of section 3111 as 
amended by the Social Security Amendments of 1956)''.
    1970--Subsec. (c). Pub. L. 91-215, Sec. 5(a), provided a variable 
standard of taxation on employers for services rendered them during any 
calendar quarter at the existing 2 cent rate for each man-hour of 
services for the period from Nov. 1, 1966 to Mar. 31, 1970, and 
thereafter at such rates as will permit supplemental annuity payments 
under section 228c(j) of this title, and authorized the Railroad 
Retirement Board to make the necessary determination of rates, and made 
it its duty to publish notice of such determinations in the Federal 
Register.
    Subsec. (d). Pub. L. 91-215, Sec. 5(b)(1), added subsec. (d).
    1966--Subsec. (a). Pub. L. 89-700, Secs. 301(iii), (v), 302, 
substituted ``after September 30, 1965'' for ``after the month in which 
this provision was amended in 1959'' in six places, and ``(i) $450, or 
(ii) an amount equal to one-twelfth of the current maximum annual 
taxable `wages' as defined in section 3121 of the Internal Revenue Code 
of 1954, whichever is greater, for any month after September 30, 1965'' 
for ``400 for any calendar month before the calendar month next 
following the month in which this provision was amended in 1963, or $450 
for any calendar month after the month in which this provision was so 
amended and before the calendar month next following the calendar month 
in which this provision was amended in 1965, or (i) $450, or (ii) an 
amount equal to one-twelfth of the current maximum annual taxable 
`wages' as defined in section 3121 of the Internal Revenue Code of 1954, 
whichever is greater, for any month after the month in which this 
provision was so amended'' in four places, and inserted sentence 
providing that where compensation for services rendered in a month is 
paid by two or more employers, one of the employers may, by notice to 
the Secretary, and by agreement with the other employer, elect for the 
tax imposed by section 3201 and this section to apply to all of the 
compensation paid by such employer for such month as does not exceed the 
maximum amount of compensation in respect to which taxes are imposed by 
section 3201 and this section; and in such a case the liability of the 
other employer shall be limited to the difference, if any, between the 
compensation paid by the electing employer and the maximum amount of 
compensation to which section 3201 and this section apply.
    Pub. L. 89-699, Sec. 301(c), substituted ``7 percent'' for ``6\3/4\ 
percent'' in subd. (3), ``7\1/4\ percent'' for ``7 percent'' in subd. 
(4), and ``7\1/2\ percent'' for ``7\1/4\ percent'' in subd. (5).
    Subsec. (b). Pub. L. 89-700, Sec. 301(vi), substituted ``after 
September 30, 1965'' for ``after December 31, 1964''.
    Subsec. (c). Pub. L. 89-699 added subsec. (c).
    1965--Subsec. (a). Pub. L. 89-212 substituted pars. (1) to (5) for 
former pars. (1) and (2) which imposed an excise tax equal to 6\3/4\ 
percent of so much of the compensation paid by such employer for 
services rendered to him after the month in which this provision was 
amended in 1959, and before Jan. 1, 1962, and 7\1/4\ percent of so much 
of the compensation paid by such employer for services rendered to him 
after Dec. 31, 1961, and inserted ``and before the calendar month next 
following the calendar month in which this provision was amended in 
1965, or (i) $450, or (ii) an amount equal to one-twelfth of the current 
maximum annual taxable `wages' as defined in section 3121, whichever is 
greater, for any month after the month in which this provision was so 
amended'' wherever appearing.
    Subsec. (b). Pub. L. 89-97 substituted ``the rate of the tax imposed 
with respect to wages by section 3111(a) at such time exceeds 2\3/4\ 
percent (the rate provided by paragraph (2) of section 3111 as amended 
by the Social Security Amendments of 1956)'' for ``the rate of the tax 
imposed with respect to wages by section 3111 at such time exceeds the 
rate provided by paragraph (2) of such section 3111 as amended by the 
Social Security Amendments of 1956'' and inserted ``plus the rate 
imposed by section 3111(b)'' after ``section 3111(a)'', respectively.
    1963--Subsec. (a). Pub. L. 88-133 limited the existing taxable 
compensation base of $400 to any calendar month before Nov. 1963 and 
increased such base to $450 for any calendar month after Oct. 1963.
    1959--Subsec. (a). Pub. L. 86-28, Sec. 201(d)(1), (2)(A), (B), 
designated former provisions of section as subsec. (a), increased the 
tax from 6\1/4\ percent of the compensation not in excess of $350 for 
any calendar month to 6\3/4\ percent of the compensation not in excess 
of $400 for any calendar month for services rendered before Jan. 1, 
1962, and to 7\1/4\ percent for services rendered after Dec. 31, 1961, 
and substituted ``after the month in which this provision was amended in 
1959'' for ``after 1954'' and for ``after December 31, 1954'' in six 
places, ``not more than $400'' for ``not more than $350'', and ``less 
than $400'' for ``less than $350''.
    Subsec. (b). Pub. L. 86-28, Sec. 201(d)(2)(C), added subsec. (b).
    1954--Act Aug. 31, 1954, substituted ``$350'' for ``$300'' wherever 
appearing.


                    Effective Date of 1987 Amendment

    Section 9032(b) of Pub. L. 100-203 provided that: ``The amendments 
made by this section [amending this section] shall apply with respect to 
compensation paid after December 31, 1987.''


            Effective and Termination Dates of 1983 Amendment

    Amendment by section 211(b) of Pub. L. 98-76 applicable to 
compensation paid for services rendered after Dec. 31, 1983, and before 
Jan. 1, 1985, see section 212 of Pub. L. 98-76, set out as a note under 
section 3201 of this title.
    Amendment by section 222 of Pub. L. 98-76 applicable to remuneration 
paid after Dec. 31, 1984, see section 227(a) of Pub. L. 98-76, set out 
as a note under section 3201 of this title.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable to compensation paid for 
services rendered after Sept. 30, 1981, see section 741(e) of Pub. L. 
97-34, set out as a note under section 3201 of this title.


                    Effective Date of 1976 Amendment

    Amendment by section 1903(a)(9) of Pub. L. 94-455 applicable with 
respect to compensation paid for services rendered after Dec. 31, 1976, 
see section 1903(d) of Pub. L. 94-455, set out as a note under section 
3101 of this title.


                    Effective Date of 1975 Amendment

    Amendment by Pub. L. 94-93 applicable for taxable years ending on or 
after Aug. 9, 1975, and for taxable years ending before Aug. 9, 1975, as 
to which the period for assessment and collection of tax or the filing 
of a claim for credit or refund has not expired on Aug. 9, 1975, see 
section 207 of Pub. L. 94-93, set out as a note under section 3201 of 
this title.


                    Effective Date of 1974 Amendment

    Section 604 of Pub. L. 93-445 provided that: ``The amendments made 
by the provisions of title V of this Act [amending this section and 
section 6413 of this title] shall become effective on January 1, 1975, 
and shall apply only with respect to compensation paid for services 
rendered on or after that date.''


                    Effective Date of 1973 Amendment

    Amendment by Pub. L. 93-69 effective Oct. 1, 1973, and applicable 
only with respect to compensation paid for services rendered on or after 
Oct. 1, 1973; and applicable to railway labor organization covered by a 
private supplemental pension plan as of Oct. 1, 1973, and subject to a 
moratorium, agreed to on or before Mar. 8, 1973, for changes in pay 
rates, on the earlier of (1) date of expiration of such moratorium, or 
(2) date as of which the railway labor organization through collective 
bargaining agreement makes amendment applicable, see section 109(b) of 
Pub. L. 93-69, set out as a note under section 3201 of this title.


                    Effective Date of 1966 Amendment

    Amendment by Pub. L. 89-699 effective with respect to man-hours, 
beginning with first month following Oct. 30, 1966, for which 
compensation is paid, see section 301(f) of Pub. L. 89-699, set out as a 
note under section 3211 of this title.


                    Effective Date of 1965 Amendments

    Amendment by section 4 of Pub. L. 89-212 effective only with respect 
to calendar months after the month in which Pub. L. 89-212 is enacted 
[September 1965], and amendment by section 5(c) of Pub. L. 89-212 
effective only with respect to compensation paid for services rendered 
after Sept. 30, 1965, see section 6 of Pub. L. 89-212, set out as a note 
under section 3201 of this title.
    Amendment by section 105(b)(3) of Pub. L. 89-97 effective with 
respect to compensation paid for services rendered after Dec. 31, 1965, 
see section 105(b)(4) of Pub. L. 89-97, set out as a note under section 
3201 of this title.
    Amendment by section 111(c)(3) of Pub. L. 89-97 applicable to 
calendar year 1966 or to any subsequent calendar year but only if by 
October 1 immediately preceding such calendar year the Railroad 
Retirement Tax Act provides for a maximum amount of monthly compensation 
taxable under such Act during all months of such calendar year equal to 
one-twelfth of maximum wages which Federal Insurance Contributions Act 
provides may be counted for such calendar year, see section 111(e) of 
Pub. L. 89-97, set out as an Effective Date note under section 1395i-1 
of Title 42, The Public Health and Welfare.


                    Effective Date of 1959 Amendment

    Amendment by Pub. L. 86-28 effective, except as otherwise provided, 
first day of calendar month next following May 1959, see section 202 of 
Pub. L. 86-28, set out as a note under section 3201 of this title.


                    Effective Date of 1954 Amendment

    Amendment by act Aug. 31, 1954, effective as if enacted as a part of 
the Internal Revenue Code of 1986 [formerly I.R.C. 1954], see section 
407 of act Aug. 31, 1954, as amended, set out as a note under section 
3201 of this title.


 Penalties and Interest Not Assessed for Failure To Make Timely Payment 
 During Period January 1, 1982, to June 30, 1982, of Taxes Attributable 
                     to Amendments by Pub. L. 97-123

    For provision that no penalties or interest shall be assessed on 
account of any failure to make timely payment of taxes imposed by 
subsec. (b) of this section with respect to payments made for the period 
Jan. 1, 1982, and ending June 30, 1982, to the extent that such taxes 
are attributable to section 3 of Pub. L. 97-123 or the amendments made 
by that section, see section 3(f) of Pub. L. 97-123, set out as a note 
under section 3101 of this title.


  Excise Taxes on Employers; Employees Covered by Certain Supplemental 
                              Pension Plans

    Section 5(b)(2) of Pub. L. 91-215 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to (A) 
supplemental annuities paid on or after April 1, 1970, and (B) man-hours 
with respect to which compensation is paid for services rendered to such 
employer on or after such day.''

                  Section Referred to in Other Sections

    This section is referred to in sections 72, 3211, 3231, 6205, 6413 
of this title; title 45 sections 231f-1, 231n, 231n-1; title 49 section 
24104.
