
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 106-519 Section 4(1)]
[Document affected by Public Law 106-554 Section 1(a)(7)[314(d)]]
[Document affected by Public Law 106-554 Section 1(a)(7)[314(g)]]
[CITE: 26USC56]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
              Subchapter A--Determination of Tax Liability
 
                    PART VI--ALTERNATIVE MINIMUM TAX
 
Sec. 56. Adjustments in computing alternative minimum taxable 
        income
        

(a) Adjustments applicable to all taxpayers

    In determining the amount of the alternative minimum taxable income 
for any taxable year the following treatment shall apply (in lieu of the 
treatment applicable for purposes of computing the regular tax):

                          (1) Depreciation

        (A) In general

            (i) Property other than certain personal property

                Except as provided in clause (ii), the depreciation 
            deduction allowable under section 167 with respect to any 
            tangible property placed in service after December 31, 1986, 
            shall be determined under the alternative system of section 
            168(g). In the case of property placed in service after 
            December 31, 1998, the preceding sentence shall not apply 
            but clause (ii) shall continue to apply.
            (ii) 150-percent declining balance method for 
                    certain property

                The method of depreciation used shall be--
                    (I) the 150 percent declining balance method,
                    (II) switching to the straight line method for the 
                1st taxable year for which using the straight line 
                method with respect to the adjusted basis as of the 
                beginning of the year will yield a higher allowance.

          The preceding sentence shall not apply to any section 1250 
            property (as defined in section 1250(c)) (and the straight 
            line method shall be used for such 1250 \1\ property) or to 
            any other property if the depreciation deduction determined 
            under section 168 with respect to such other property for 
            purposes of the regular tax is determined by using the 
            straight line method.
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    \1\ So in original. Probably should be ``section 1250''.
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        (B) Exception for certain property

            This paragraph shall not apply to property described in 
        paragraph (1), (2), (3), or (4) of section 168(f).

        (C) Coordination with transitional rules

            (i) In general

                This paragraph shall not apply to property placed in 
            service after December 31, 1986, to which the amendments 
            made by section 201 of the Tax Reform Act of 1986 do not 
            apply by reason of section 203, 204, or 251(d) of such Act.
            (ii) Treatment of certain property placed in service 
                    before 1987

                This paragraph shall apply to any property to which the 
            amendments made by section 201 of the Tax Reform Act of 1986 
            apply by reason of an election under section 203(a)(1)(B) of 
            such Act without regard to the requirement of subparagraph 
            (A) that the property be placed in service after December 
            31, 1986.

        (D) Normalization rules

            With respect to public utility property described in section 
        168(i)(10), the Secretary shall prescribe the requirements of a 
        normalization method of accounting for this section.

            (2) Mining exploration and development costs

        (A) In general

            With respect to each mine or other natural deposit (other 
        than an oil, gas, or geothermal well) of the taxpayer, the 
        amount allowable as a deduction under section 616(a) or 617(a) 
        (determined without regard to section 291(b)) in computing the 
        regular tax for costs paid or incurred after December 31, 1986, 
        shall be capitalized and amortized ratably over the 10-year 
        period beginning with the taxable year in which the expenditures 
        were made.

        (B) Loss allowed

            If a loss is sustained with respect to any property 
        described in subparagraph (A), a deduction shall be allowed for 
        the expenditures described in subparagraph (A) for the taxable 
        year in which such loss is sustained in an amount equal to the 
        lesser of--
                (i) the amount allowable under section 165(a) for the 
            expenditures if they had remained capitalized, or
                (ii) the amount of such expenditures which have not 
            previously been amortized under subparagraph (A).

            (3) Treatment of certain long-term contracts

        In the case of any long-term contract entered into by the 
    taxpayer on or after March 1, 1986, the taxable income from such 
    contract shall be determined under the percentage of completion 
    method of accounting (as modified by section 460(b)). For purposes 
    of the preceding sentence, in the case of a contract described in 
    section 460(e)(1), the percentage of the contract completed shall be 
    determined under section 460(b)(1) by using the simplified 
    procedures for allocation of costs prescribed under section 
    460(b)(3). The first sentence of this paragraph shall not apply to 
    any home construction contract (as defined in section 460(e)(6)).

          (4) Alternative tax net operating loss deduction

        The alternative tax net operating loss deduction shall be 
    allowed in lieu of the net operating loss deduction allowed under 
    section 172.

                  (5) Pollution control facilities

        In the case of any certified pollution control facility placed 
    in service after December 31, 1986, the deduction allowable under 
    section 169 (without regard to section 291) shall be determined 
    under the alternative system of section 168(g). In the case of such 
    a facility placed in service after December 31, 1998, such deduction 
    shall be determined under section 168 using the straight line 
    method.

                         (6) Adjusted basis

        The adjusted basis of any property to which paragraph (1) or (5) 
    applies (or with respect to which there are any expenditures to 
    which paragraph (2) or subsection (b)(2) applies) shall be 
    determined on the basis of the treatment prescribed in paragraph 
    (1), (2), or (5), or subsection (b)(2), whichever applies.

                    (7) Section 87 not applicable

        Section 87 (relating to alcohol fuel credit) shall not apply.

(b) Adjustments applicable to individuals

    In determining the amount of the alternative minimum taxable income 
of any taxpayer (other than a corporation), the following treatment 
shall apply (in lieu of the treatment applicable for purposes of 
computing the regular tax):

                    (1) Limitation on deductions

        (A) In general

            No deduction shall be allowed--
                (i) for any miscellaneous itemized deduction (as defined 
            in section 67(b)), or
                (ii) for any taxes described in paragraph (1), (2), or 
            (3) of section 164(a).

        Clause (ii) shall not apply to any amount allowable in computing 
        adjusted gross income.

        (B) Medical expenses

            In determining the amount allowable as a deduction under 
        section 213, subsection (a) of section 213 shall be applied by 
        substituting ``10 percent'' for ``7.5 percent''.

        (C) Interest

            In determining the amount allowable as a deduction for 
        interest, subsections (d) and (h) of section 163 shall apply, 
        except that--
                (i) in lieu of the exception under section 163(h)(2)(D), 
            the term ``personal interest'' shall not include any 
            qualified housing interest (as defined in subsection (e)),
                (ii) sections 163(d)(6) and 163(h)(5) (relating to 
            phase-ins) shall not apply,
                (iii) interest on any specified private activity bond 
            (and any amount treated as interest on a specified private 
            activity bond under section 57(a)(5)(B)), and any deduction 
            referred to in section 57(a)(5)(A), shall be treated as 
            includible in gross income (or as deductible) for purposes 
            of applying section 163(d),
                (iv) in lieu of the exception under section 
            163(d)(3)(B)(i), the term ``investment interest'' shall not 
            include any qualified housing interest (as defined in 
            subsection (e)), and
                (v) the adjustments of this section and sections 57 and 
            58 shall apply in determining net investment income under 
            section 163(d).

        (D) Treatment of certain recoveries

            No recovery of any tax to which subparagraph (A)(ii) applied 
        shall be included in gross income for purposes of determining 
        alternative minimum taxable income.

        (E) Standard deduction and deduction for personal exemptions not 
                allowed

            The standard deduction under section 63(c), the deduction 
        for personal exemptions under section 151, and the deduction 
        under section 642(b) shall not be allowed.

        (F) Section 68 not applicable

            Section 68 shall not apply.

     (2) Circulation and research and experimental expenditures

        (A) In general

            The amount allowable as a deduction under section 173 or 
        174(a) in computing the regular tax for amounts paid or incurred 
        after December 31, 1986, shall be capitalized and--
                (i) in the case of circulation expenditures described in 
            section 173, shall be amortized ratably over the 3-year 
            period beginning with the taxable year in which the 
            expenditures were made, or
                (ii) in the case of research and experimental 
            expenditures described in section 174(a), shall be amortized 
            ratably over the 10-year period beginning with the taxable 
            year in which the expenditures were made.

        (B) Loss allowed

            If a loss is sustained with respect to any property 
        described in subparagraph (A), a deduction shall be allowed for 
        the expenditures described in subparagraph (A) for the taxable 
        year in which such loss is sustained in an amount equal to the 
        lesser of--
                (i) the amount allowable under section 165(a) for the 
            expenditures if they had remained capitalized, or
                (ii) the amount of such expenditures which have not 
            previously been amortized under subparagraph (A).

        (C) Special rule for personal holding companies

            In the case of circulation expenditures described in section 
        173, the adjustments provided in this paragraph shall apply also 
        to a personal holding company (as defined in section 542).

        (D) Exception for certain research and experimental expenditures

            If the taxpayer materially participates (within the meaning 
        of section 469(h)) in an activity, this paragraph shall not 
        apply to any amount allowable as a deduction under section 
        174(a) for expenditures paid or incurred in connection with such 
        activity.

              (3) Treatment of incentive stock options

        Section 421 shall not apply to the transfer of stock acquired 
    pursuant to the exercise of an incentive stock option (as defined in 
    section 422). Section 422(c)(2) shall apply in any case where the 
    disposition and the inclusion for purposes of this part are within 
    the same taxable year and such section shall not apply in any other 
    case. The adjusted basis of any stock so acquired shall be 
    determined on the basis of the treatment prescribed by this 
    paragraph.

(c) Adjustments applicable to corporations

    In determining the amount of the alternative minimum taxable income 
of a corporation, the following treatment shall apply:

            (1) Adjustment for adjusted current earnings

        Alternative minimum taxable income shall be adjusted as provided 
    in subsection (g).

           (2) Merchant marine capital construction funds

        In the case of a capital construction fund established under 
    section 607 of the Merchant Marine Act, 1936 (46 \2\ U.S.C. 1177)--
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    \2\ So in original. Probably should be ``46 App.''
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            (A) subparagraphs (A), (B), and (C) of section 7518(c)(1) 
        (and the corresponding provisions of such section 607) shall not 
        apply to--
                (i) any amount deposited in such fund after December 31, 
            1986, or
                (ii) any earnings (including gains and losses) after 
            December 31, 1986, on amounts in such fund, and

            (B) no reduction in basis shall be made under section 
        7518(f) (or the corresponding provisions of such section 607) 
        with respect to the withdrawal from the fund of any amount to 
        which subparagraph (A) applies.

    For purposes of this paragraph, any withdrawal of deposits or 
    earnings from the fund shall be treated as allocable first to 
    deposits made before (and earnings received or accrued before) 
    January 1, 1987.

     (3) Special deduction for certain organizations not allowed

        The deduction determined under section 833(b) shall not be 
    allowed.

(d) Alternative tax net operating loss deduction defined

                           (1) In general

        For purposes of subsection (a)(4), the term ``alternative tax 
    net operating loss deduction'' means the net operating loss 
    deduction allowable for the taxable year under section 172, except 
    that--
            (A) the amount of such deduction shall not exceed 90 percent 
        of alternate minimum taxable income determined without regard to 
        such deduction, and
            (B) in determining the amount of such deduction--
                (i) the net operating loss (within the meaning of 
            section 172(c)) for any loss year shall be adjusted as 
            provided in paragraph (2), and
                (ii) appropriate adjustments in the application of 
            section 172(b)(2) shall be made to take into account the 
            limitation of subparagraph (A).

          (2) Adjustments to net operating loss computation

        (A) Post-1986 loss years

            In the case of a loss year beginning after December 31, 
        1986, the net operating loss for such year under section 172(c) 
        shall--
                (i) be determined with the adjustments provided in this 
            section and section 58, and
                (ii) be reduced by the items of tax preference 
            determined under section 57 for such year.

        An item of tax preference shall be taken into account under 
        clause (ii) only to the extent such item increased the amount of 
        the net operating loss for the taxable year under section 
        172(c).

        (B) Pre-1987 years

            In the case of loss years beginning before January 1, 1987, 
        the amount of the net operating loss which may be carried over 
        to taxable years beginning after December 31, 1986, for purposes 
        of paragraph (2), shall be equal to the amount which may be 
        carried from the loss year to the first taxable year of the 
        taxpayer beginning after December 31, 1986.

(e) Qualified housing interest

    For purposes of this part--

                           (1) In general

        The term ``qualified housing interest'' means interest which is 
    qualified residence interest (as defined in section 163(h)(3)) and 
    is paid or accrued during the taxable year on indebtedness which is 
    incurred in acquiring, constructing, or substantially improving any 
    property which--
            (A) is the principal residence (within the meaning of 
        section 121) of the taxpayer at the time such interest accrues, 
        or
            (B) is a qualified dwelling which is a qualified residence 
        (within the meaning of section 163(h)(4)).

    Such term also includes interest on any indebtedness resulting from 
    the refinancing of indebtedness meeting the requirements of the 
    preceding sentence; but only to the extent that the amount of the 
    indebtedness resulting from such refinancing does not exceed the 
    amount of the refinanced indebtedness immediately before the 
    refinancing.

                       (2) Qualified dwelling

        The term ``qualified dwelling'' means any--
            (A) house,
            (B) apartment,
            (C) condominium, or
            (D) mobile home not used on a transient basis (within the 
        meaning of section 7701(a)(19)(C)(v)),

    including all structures or other property appurtenant thereto.

     (3) Special rule for indebtedness incurred before July 1, 
                                    1982

        The term ``qualified housing interest'' includes interest which 
    is qualified residence interest (as defined in section 163(h)(3)) 
    and is paid or accrued on indebtedness which--
            (A) was incurred by the taxpayer before July 1, 1982, and
            (B) is secured by property which, at the time such 
        indebtedness was incurred, was--
                (i) the principal residence (within the meaning of 
            section 121) of the taxpayer, or
                (ii) a qualified dwelling used by the taxpayer (or any 
            member of his family (within the meaning of section 
            267(c)(4))).

[(f) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(3), Nov. 5, 
        1990, 104 Stat. 1388-520]

(g) Adjustments based on adjusted current earnings

                           (1) In general

        The alternative minimum taxable income of any corporation for 
    any taxable year shall be increased by 75 percent of the excess (if 
    any) of--
            (A) the adjusted current earnings of the corporation, over
            (B) the alternative minimum taxable income (determined 
        without regard to this subsection and the alternative tax net 
        operating loss deduction).

                (2) Allowance of negative adjustments

        (A) In general

            The alternative minimum taxable income for any corporation 
        of any taxable year, shall be reduced by 75 percent of the 
        excess (if any) of--
                (i) the amount referred to in subparagraph (B) of 
            paragraph (1), over
                (ii) the amount referred to in subparagraph (A) of 
            paragraph (1).

        (B) Limitation

            The reduction under subparagraph (A) for any taxable year 
        shall not exceed the excess (if any) of--
                (i) the aggregate increases in alternative minimum 
            taxable income under paragraph (1) for prior taxable years, 
            over
                (ii) the aggregate reductions under subparagraph (A) of 
            this paragraph for prior taxable years.

                    (3) Adjusted current earnings

        For purposes of this subsection, the term ``adjusted current 
    earnings'' means the alternative minimum taxable income for the 
    taxable year--
            (A) determined with the adjustments provided in paragraph 
        (4), and
            (B) determined without regard to this subsection and the 
        alternative tax net operating loss deduction.

                           (4) Adjustments

        In determining adjusted current earnings, the following 
    adjustments shall apply:

        (A) Depreciation

            (i) Property placed in service after 1989

                The depreciation deduction with respect to any property 
            placed in service in a taxable year beginning after 1989 
            shall be determined under the alternative system of section 
            168(g). The preceding sentence shall not apply to any 
            property placed in service after December 31, 1993, and the 
            depreciation deduction with respect to such property shall 
            be determined under the rules of subsection (a)(1)(A).
            (ii) Property to which new ACRS system applies

                In the case of any property to which the amendments made 
            by section 201 of the Tax Reform Act of 1986 apply and which 
            is placed in service in a taxable year beginning before 
            1990, the depreciation deduction shall be determined--
                    (I) by taking into account the adjusted basis of 
                such property (as determined for purposes of computing 
                alternative minimum taxable income) as of the close of 
                the last taxable year beginning before January 1, 1990, 
                and
                    (II) by using the straight-line method over the 
                remainder of the recovery period applicable to such 
                property under the alternative system of section 168(g).
            (iii) Property to which original ACRS system applies

                In the case of any property to which section 168 (as in 
            effect on the day before the date of the enactment of the 
            Tax Reform Act of 1986 and without regard to subsection 
            (d)(1)(A)(ii) thereof) applies and which is placed in 
            service in a taxable year beginning before 1990, the 
            depreciation deduction shall be determined--
                    (I) by taking into account the adjusted basis of 
                such property (as determined for purposes of computing 
                the regular tax) as of the close of the last taxable 
                year beginning before January 1, 1990, and
                    (II) by using the straight line method over the 
                remainder of the recovery period which would apply to 
                such property under the alternative system of section 
                168(g).
            (iv) Property placed in service before 1981

                In the case of any property not described in clause (i), 
            (ii), or (iii), the amount allowable as depreciation or 
            amortization with respect to such property shall be 
            determined in the same manner as for purposes of computing 
            taxable income.
            (v) Special rule for certain property

                In the case of any property described in paragraph (1), 
            (2), (3), or (4) of section 168(f), the amount of 
            depreciation allowable for purposes of the regular tax shall 
            be treated as the amount allowable under the alternative 
            system of section 168(g).

        (B) Inclusion of items included for purposes of computing 
                earnings and profits

            (i) In general

                In the case of any amount which is excluded from gross 
            income for purposes of computing alternative minimum taxable 
            income but is taken into account in determining the amount 
            of earnings and profits--
                    (I) such amount shall be included in income in the 
                same manner as if such amount were includible in gross 
                income for purposes of computing alternative minimum 
                taxable income, and
                    (II) the amount of such income shall be reduced by 
                any deduction which would have been allowable in 
                computing alternative minimum taxable income if such 
                amount were includible in gross income.

          The preceding sentence shall not apply in the case of any 
            amount excluded from gross income under section 108 (or the 
            corresponding provisions of prior law) or under section 114. 
            In the case of any insurance company taxable under section 
            831(b), this clause shall not apply to any amount not 
            described in section 834(b).
            (ii) Inclusion of buildup in life insurance 
                    contracts

                In the case of any life insurance contract--
                    (I) the income on such contract (as determined under 
                section 7702(g)) for any taxable year shall be treated 
                as includible in gross income for such year, and
                    (II) there shall be allowed as a deduction that 
                portion of any premium which is attributable to 
                insurance coverage.

        (C) Disallowance of items not deductible in computing earnings 
                and profits

            (i) In general

                A deduction shall not be allowed for any item if such 
            item would not be deductible for any taxable year for 
            purposes of computing earnings and profits.
            (ii) Special rule for certain dividends

                (I) In general

                    Clause (i) shall not apply to any deduction 
                allowable under section 243 or 245 for any dividend 
                which is a 100-percent dividend or which is received 
                from a 20-percent owned corporation (as defined in 
                section 243(c)(2)), but only to the extent such dividend 
                is attributable to income of the paying corporation 
                which is subject to tax under this chapter (determined 
                after the application of sections 30A, 936 (including 
                subsections (a)(4), (i), and (j) thereof) and 921).\3\
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    \3\ See References in Text note below.
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                (II) 100-percent dividend

                    For purposes of subclause (I), the term ``100 
                percent dividend'' means any dividend if the percentage 
                used for purposes of determining the amount allowable as 
                a deduction under section 243 or 245 with respect to 
                such dividend is 100 percent.
            (iii) Treatment of taxes on dividends from 936 
                    corporations

                (I) In general

                    For purposes of determining the alternative minimum 
                foreign tax credit, 75 percent of any withholding or 
                income tax paid to a possession of the United States 
                with respect to dividends received from a corporation 
                eligible for the credit provided by section 936 shall be 
                treated as a tax paid to a foreign country by the 
                corporation receiving the dividend.
                (II) Limitation

                    If the aggregate amount of the dividends referred to 
                in subclause (I) for any taxable year exceeds the excess 
                referred to in paragraph (1), the amount treated as tax 
                paid to a foreign country under subclause (I) shall not 
                exceed the amount which would be so treated without 
                regard to this subclause multiplied by a fraction the 
                numerator of which is the excess referred to in 
                paragraph (1) and the denominator of which is the 
                aggregate amount of such dividends.
                (III) Treatment of taxes imposed on 936 
                        corporation

                    For purposes of this clause, taxes paid by any 
                corporation eligible for the credit provided by section 
                936 to a possession of the United States shall be 
                treated as a withholding tax paid with respect to any 
                dividend paid by such corporation to the extent such 
                taxes would be treated as paid by the corporation 
                receiving the dividend under rules similar to the rules 
                of section 902 (and the amount of any such dividend 
                shall be increased by the amount so treated).
                (IV) Separate application of foreign tax credit 
                        limitations

                    In determining the alternative minimum foreign tax 
                credit, section 904(d) shall be applied as if dividends 
                from a corporation eligible for the credit provided by 
                section 936 were a separate category of income referred 
                to in a subparagraph of section 904(d)(1).
                (V) Coordination with limitation on 936 credit

                    Any reference in this clause to a dividend received 
                from a corporation eligible for the credit provided by 
                section 936 shall be treated as a reference to the 
                portion of any such dividend for which the dividends 
                received deduction is disallowed under clause (i) after 
                the application of clause (ii)(I).
                (VI) Application to section 30A corporations

                    References in this clause to section 936 shall be 
                treated as including references to section 30A.
            (iv) Special rule for certain dividends received by 
                    certain cooperatives

                In the case of a cooperative described in section 
            927(a)(4),\3\ clause (i) shall not apply to any amount 
            allowable as a deduction under section 245(c).

        (D) Certain other earnings and profits adjustments

            (i) Intangible drilling costs

                The adjustments provided in section 312(n)(2)(A) shall 
            apply in the case of amounts paid or incurred in taxable 
            years beginning after December 31, 1989. In the case of a 
            taxpayer other than an integrated oil company (as defined in 
            section 291(b)(4)), in the case of any oil or gas well, this 
            clause shall not apply in the case of amounts paid or 
            incurred in taxable years beginning after December 31, 1992.
            (ii) Certain amortization provisions not to apply

                Sections 173 and 248 shall not apply to expenditures 
            paid or incurred in taxable years beginning after December 
            31, 1989.
            (iii) LIFO inventory adjustments

                The adjustments provided in section 312(n)(4) shall 
            apply, but only with respect to taxable years beginning 
            after December 31, 1989.
            (iv) Installment sales

                In the case of any installment sale in a taxable year 
            beginning after December 31, 1989, adjusted current earnings 
            shall be computed as if the corporation did not use the 
            installment method. The preceding sentence shall not apply 
            to the applicable percentage (as determined under section 
            453A) of the gain from any installment sale with respect to 
            which section 453A(a)(1) applies.

        (E) Disallowance of loss on exchange of debt pools

            No loss shall be recognized on the exchange of any pool of 
        debt obligations for another pool of debt obligations having 
        substantially the same effective interest rates and maturities.

        (F) Depletion

            (i) In general

                The allowance for depletion with respect to any property 
            placed in service in a taxable year beginning after December 
            31, 1989, shall be cost depletion determined under section 
            611.
            (ii) Exception for independent oil and gas producers 
                    and royalty owners

                In the case of any taxable year beginning after December 
            31, 1992, clause (i) (and subparagraph (C)(i)) shall not 
            apply to any deduction for depletion computed in accordance 
            with section 613A(c).

        (G) Treatment of certain ownership changes

            If--
                (i) there is an ownership change (within the meaning of 
            section 382) in a taxable year beginning after 1989 with 
            respect to any corporation, and
                (ii) there is a net unrealized built-in loss (within the 
            meaning of section 382(h)) with respect to such corporation,

        then the adjusted basis of each asset of such corporation 
        (immediately after the ownership change) shall be its 
        proportionate share (determined on the basis of respective fair 
        market values) of the fair market value of the assets of such 
        corporation (determined under section 382(h)) immediately before 
        the ownership change.

        (H) Adjusted basis

            The adjusted basis of any property with respect to which an 
        adjustment under this paragraph applies shall be determined by 
        applying the treatment prescribed in this paragraph.

        (I) Treatment of charitable contributions

            Notwithstanding subparagraphs (B) and (C), no adjustment 
        related to the earnings and profits effects of any charitable 
        contribution shall be made in computing adjusted current 
        earnings.

                        (5) Other definitions

        For purposes of paragraph (4)--

        (A) Earnings and profits

            The term ``earnings and profits'' means earnings and profits 
        computed for purposes of subchapter C.

        (B) Treatment of alternative minimum taxable income

            The treatment of any item for purposes of computing 
        alternative minimum taxable income shall be determined without 
        regard to this subsection.

               (6) Exception for certain corporations

        This subsection shall not apply to any S corporation, regulated 
    investment company, real estate investment trust, REMIC, or FASIT.

(Added Pub. L. 99-514, title VII, Sec. 701(a), Oct. 22, 1986, 100 Stat. 
2322; amended Pub. L. 100-203, title X, Secs. 10202(d), 10243(a), Dec. 
22, 1987, 101 Stat. 1330-392, 1330-423; Pub. L. 100-647, title I, 
Secs. 1002(a)(12), 1007(b)(1)-(14)(A), (15)-(19), title II, 
Secs. 2001(c)(3)(A), 2004(b)(2), (3), title V, Sec. 5041(b)(4), title 
VI, Secs. 6079(a)(1), 6303(a), Nov. 10, 1988, 102 Stat. 3355, 3428-3432, 
3594, 3599, 3674, 3709, 3755; Pub. L. 101-239, title VII, Secs. 7205(b), 
7611(a)-(f)(4), 7612(c)(1), (d)(1), 7811(d)(3), 7815(e)(2), (4), Dec. 
19, 1989, 103 Stat. 2335, 2371-2374, 2408, 2419; Pub. L. 101-508, title 
XI, Secs. 11103(b), 11301(b), 11531(a), (b)(1), 11704(a)(1), 
11801(a)(3), (c)(2)(A)-(C), (9)(G), 11812(b)(4), Nov. 5, 1990, 104 Stat. 
1388-406, 1388-449, 1388-488, 1388-490, 1388-518, 1388-520, 1388-522, 
1388-523, 1388-526, 1388-535; Pub. L. 102-486, title XIX, 
Sec. 1915(a)(2), (b)(2), (c)(1), (2), Oct. 24, 1992, 106 Stat. 3023, 
3024; Pub. L. 103-66, title XIII, Secs. 13115(a), 13171(b), 13227(c), 
Aug. 10, 1993, 107 Stat. 432, 454, 493; Pub. L. 104-188, title I, 
Secs. 1601(b)(2)(B), (C), 1621(b)(2), 1702(c)(1), (e)(1)(A), (g)(4), 
(h)(12), 1704(t)(1), (48), Aug. 20, 1996, 110 Stat. 1832, 1833, 1867, 
1869, 1870, 1873, 1874, 1887, 1889; Pub. L. 105-34, title III, 
Sec. 312(d)(1), title IV, Secs. 402, 403(a), title XII, Sec. 1212(a), 
Aug. 5, 1997, 111 Stat. 839, 844, 1000; Pub. L. 105-277, div. J, title 
IV, Sec. 4006(c)(2), Oct. 21, 1998, 112 Stat. 2681-912; Pub. L. 106-519, 
Sec. 4(1), Nov. 15, 2000, 114 Stat. 2432; Pub. L. 106-554, Sec. 1(a)(7) 
[title III, Sec. 314(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A-643.)

                       References in Text

    Section 201 of the Tax Reform Act of 1986, referred to in subsecs. 
(a)(1)(C) and (g)(4)(A)(ii), is section 201 of Pub. L. 99-514, which 
amended sections 46, 167, 168, 178, 179, 280F, 291, 312, 465, 467, 514, 
751, 1245, 4162, 6111, and 7701 of this title.
    Sections 203, 204, and 251(d) of such Act, referred to in subsec. 
(a)(1)(C), are sections 203, 204, and 251(d) of the Tax Reform Act of 
1986, Pub. L. 99-514. Sections 203 and 204 are set out as notes under 
section 168 of this title. Section 251(d) is set out as a note under 
section 46 of this title.
    The date of the enactment of the Tax Reform Act of 1986, referred to 
in subsec. (g)(4)(A)(iii), is the date of enactment of Pub. L. 99-514, 
which was approved Oct. 22, 1986.
    Sections 921 and 927, referred to in subsec. (g)(4)(C), were 
repealed by Pub. L. 106-519, Sec. 2, Nov. 15, 2000, 114 Stat. 2423.


                            Prior Provisions

    A prior section 56, added Pub. L. 91-172, title III, Sec. 301(a), 
Dec. 30, 1969, 83 Stat. 580; amended Pub. L. 91-614, title V, 
Sec. 501(a), Dec. 31, 1970, 84 Stat. 1846; Pub. L. 92-178, title VI, 
Sec. 601(c)(4), (5), Dec. 10, 1971, 85 Stat. 558; Pub. L. 93-406, title 
II, Secs. 2001(g)(2)(D), 2002(g)(4), 2005(c)(7), Sept. 2, 1974, 88 Stat. 
957, 968, 991; Pub. L. 94-12, title II, Secs. 203(b)(2), (3), 208(d)(2), 
(3), Mar. 29, 1975, 89 Stat. 30, 35; Pub. L. 94-455, title III, 
Sec. 301(a), (b), (c)(4)(B), Oct. 4, 1976, 90 Stat. 1549, 1552; Pub. L. 
95-30, title II, Sec. 202(d)(2), May 23, 1977, 91 Stat. 148; Pub. L. 95-
600, title I, Sec. 141(d), Nov. 6, 1978, 92 Stat. 2794; Pub. L. 95-618, 
title I, Sec. 101(b)(2), Nov. 9, 1978, 92 Stat. 3179; Pub. L. 96-222, 
title I, Sec. 101(a)(7)(L)(iii)(IV), Apr. 1, 1980, 94 Stat. 200; Pub. L. 
97-34, title III, Sec. 331(c)(2), Aug. 13, 1981, 95 Stat. 293; Pub. L. 
97-248, title II, Sec. 201(d)(1), formerly Sec. 201(c)(1), Sept. 3, 
1982, 96 Stat. 419, renumbered Sec. 201(d)(1), Pub. L. 97-448, title 
III, Sec. 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 98-369, 
div. A, title IV, Sec. 474(r)(1), July 18, 1984, 98 Stat. 839; Pub. L. 
99-514, title XI, Sec. 1171(b)(3), Oct. 22, 1986, 100 Stat. 2513, 
related to a corporate minimum tax, prior to the general revision of 
this part by Pub. L. 99-514, Sec. 701(a).


                               Amendments

    2000--Subsec. (a)(1)(A)(ii). Pub. L. 106-554 inserted ``(and the 
straight line method shall be used for such 1250 property)'' before ``or 
to any other property'' in concluding provisions.
    Subsec. (g)(4)(B)(i). Pub. L. 106-519 inserted ``or under section 
114'' before the period at end of first sentence in concluding 
provisions.
    1998--Subsec. (a)(3). Pub. L. 105-277 substituted ``section 
460(b)(1)'' for ``section 460(b)(2)'' and ``section 460(b)(3)'' for 
``section 460(b)(4)''.
    1997--Subsec. (a)(1)(A)(i). Pub. L. 105-34, Sec. 402(a), inserted at 
end ``In the case of property placed in service after December 31, 1998, 
the preceding sentence shall not apply but clause (ii) shall continue to 
apply.''
    Subsec. (a)(5). Pub. L. 105-34, Sec. 402(b), inserted at end ``In 
the case of such a facility placed in service after December 31, 1998, 
such deduction shall be determined under section 168 using the straight 
line method.''
    Subsec. (a)(6) to (8). Pub. L. 105-34, Sec. 403(a), redesignated 
pars. (7) and (8) as (6) and (7), respectively, and struck out former 
par. (6) which read as follows:
    ``(6) Installment sales of certain property.--In the case of any 
disposition after March 1, 1986, of any property described in section 
1221(1), income from such disposition shall be determined without regard 
to the installment method under section 453. This paragraph shall not 
apply to any disposition with respect to which an election is in effect 
under section 453(l)(2)(B).''
    Subsec. (e)(1)(A), (3)(B)(i). Pub. L. 105-34, Sec. 312(d)(1), 
substituted ``section 121'' for ``section 1034''.
    Subsec. (g)(4)(B)(i). Pub. L. 105-34, Sec. 1212(a), inserted at end 
of concluding provisions ``In the case of any insurance company taxable 
under section 831(b), this clause shall not apply to any amount not 
described in section 834(b).''
    1996--Subsec. (b)(3). Pub. L. 104-188, Sec. 1702(h)(12), provided 
that the amendment made by section 11801(c)(9)(G)(ii) of Pub. L. 101-508 
shall be applied as if it struck ``Section 422A(c)(2)'' and inserted 
``Section 422(c)(2)''. See 1990 Amendment note below.
    Subsec. (d)(1)(B)(ii). Pub. L. 101-508, Sec. 1702(e)(1)(A), amended 
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ``in 
the case of taxable years beginning after December 31, 1986, section 
172(b)(2) shall be applied by substituting `90 percent of alternative 
minimum taxable income determined without regard to the alternative tax 
net operating loss deduction' for `taxable income' each place it 
appears.''
    Subsec. (g)(1), (2)(A). Pub. L. 104-188, Sec. 1704(t)(48), provided 
that section 11801(c)(2)(B) of Pub. L. 101-508 shall be applied as if 
``section 56(g)'' appeared instead of ``section 59(g)''. See 1990 
Amendment note below.
    Subsec. (g)(4)(C)(ii)(I). Pub. L. 104-188, Sec. 1601(b)(2)(B), 
inserted ``30A,'' before ``936'' and substituted ``, (i), and (j)'' for 
``and (i)''.
    Subsec. (g)(4)(C)(ii)(II). Pub. L. 104-188, Sec. 1704(t)(1), 
substituted ``of subclause'' for ``of the subclause''.
    Subsec. (g)(4)(C)(iii)(VI). Pub. L. 104-188, Sec. 1601(b)(2)(C), 
added subcl. (VI).
    Subsec. (g)(4)(D)(iii). Pub. L. 104-188, Sec. 1702(g)(4), inserted 
``, but only with respect to taxable years beginning after December 31, 
1989'' before period at end.
    Subsec. (g)(4)(H) to (J). Pub. L. 104-188, Sec. 1702(c)(1), 
redesignated subpars. (I) and (J) as (H) and (I), respectively.
    Subsec. (g)(6). Pub. L. 104-188, Sec. 1621(b)(2), substituted 
``REMIC, or FASIT'' for ``or REMIC''.
    1993--Subsec. (g)(4)(A)(i). Pub. L. 103-66, Sec. 13115(a), inserted 
at end ``The preceding sentence shall not apply to any property placed 
in service after December 31, 1993, and the depreciation deduction with 
respect to such property shall be determined under the rules of 
subsection (a)(1)(A).''
    Subsec. (g)(4)(C)(ii)(I). Pub. L. 103-66, Sec. 13227(c)(1), 
substituted ``sections 936 (including subsections (a)(4) and (i) 
thereof) and 921'' for ``sections 936 and 921''.
    Subsec. (g)(4)(C)(iii)(IV), (V). Pub. L. 103-66, Sec. 13227(c)(2), 
added subcls. (IV) and (V).
    Subsec. (g)(4)(J). Pub. L. 103-66, Sec. 13171(b), added subpar. (J).
    1992--Subsec. (d)(1)(A). Pub. L. 102-486, Sec. 1915(c)(2), amended 
subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: 
``the amount of such deduction shall not exceed the excess (if any) of--
        ``(i) 90 percent of alternative minimum taxable income 
    determined without regard to such deduction and the deduction under 
    subsection (h), over
        ``(ii) the deduction under subsection (h), and''.
    Subsec. (g)(4)(D)(i). Pub. L. 102-486, Sec. 1915(b)(2), inserted at 
end ``In the case of a taxpayer other than an integrated oil company (as 
defined in section 291(b)(4)), in the case of any oil or gas well, this 
clause shall not apply in the case of amounts paid or incurred in 
taxable years beginning after December 31, 1992.''
    Subsec. (g)(4)(F). Pub. L. 102-486, Sec. 1915(a)(2), amended subpar. 
(F) generally. Prior to amendment, subpar. (F) read as follows: ``The 
allowance for depletion with respect to any property placed in service 
in a taxable year beginning after 1989 shall be cost depletion 
determined under section 611.''
    Subsec. (h). Pub. L. 102-486, Sec. 1915(c)(1), struck out subsec. 
(h) which related to adjustment based on energy preferences.
    1990--Subsec. (a)(1)(D). Pub. L. 101-508, Sec. 11812(b)(4), 
substituted ``section 168(i)(10)'' for ``section 167(l)(3)(A)''.
    Subsec. (b)(1)(F). Pub. L. 101-508, Sec. 11103(b), added subpar. 
(F).
    Subsec. (b)(3). Pub. L. 101-508, Sec. 11801(c)(9)(G)(i), substituted 
``section 422'' for ``section 422A''.
    Pub. L. 101-508, Sec. 11801(c)(9)(G)(ii), which directed the 
substitution of ``section 422(c)(2)'' for ``section 422A(c)(2)'', was 
executed by substituting ``Section 422(c)(2)'' for ``Section 
422A(c)(2)''. See 1996 Amendment note above.
    Subsec. (c)(1). Pub. L. 101-508, Sec. 11801(c)(2)(A), substituted 
heading for one which read: ``Adjustment for book income or adjusted 
current earnings'' and amended text generally. Prior to amendment, text 
read as follows:
    ``(A) Book income adjustment.--For taxable years beginning in 1987, 
1988, and 1989, alternative minimum taxable income shall be adjusted as 
provided under subsection (f).
    ``(B) Adjusted current earnings.--For taxable years beginning after 
1989, alternative minimum taxable income shall be adjusted as provided 
under subsection (g).''
    Subsec. (d)(1)(A). Pub. L. 101-508, Sec. 11531(b)(1), amended 
subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: 
``the amount of such deduction shall not exceed 90 percent of 
alternative minimum taxable income determined without regard to such 
deduction, and''.
    Subsec. (f). Pub. L. 101-508, Sec. 11801(a)(3), struck out subsec. 
(f) which related to adjustments for book income of corporations with 
respect to minimum taxable income, adjusted net book income, adjustments 
for certain taxes, special rules for related corporations for 
consolidated returns, treatment of dividends, statements covering 
different periods, special rule for cooperatives, treatment and 
limitation of taxes on dividends from 936 corporations, rules for Alaska 
native corporations, special rules for life insurance companies, 
exclusion of certain income from transfer of stock for debt, secretarial 
authority to adjust items, applicable financial statements, earnings and 
profits used, special rules for more than one statement and exception 
for certain corporations.
    Subsec. (g)(1), (2)(A). Pub. L. 101-508, Sec. 11801(c)(2)(B), which 
directed that pars. (1) and (2) ``of section 59(g) are each amended by 
striking `beginning after 1989' '', was executed to pars. (1) and (2)(A) 
of subsec. (g) of this section after ``any taxable year''. See 1996 
Amendment note above.
    Subsec. (g)(4)(C)(iii). Pub. L. 101-508, Sec. 11801(c)(2)(C), 
substituted heading for one which read: ``Special rule for dividends 
from section 936 companies'' and amended text generally. Prior to 
amendment, text read as follows: ``In the case of any dividend received 
from a corporation eligible for the credit provided by section 936, 
rules similar to the rules of subparagraph (F) of subsection (f)(1) 
shall apply, except that `75 percent' shall be substituted for `50 
percent' in clause (i) thereof.''
    Subsec. (g)(4)(D)(ii). Pub. L. 101-508, Sec. 11704(a)(1), 
substituted ``years'' for ``year''.
    Subsec. (g)(4)(F) to (H). Pub. L. 101-508, Sec. 11301(b), 
redesignated subpars. (G) and (H) as (F) and (G), respectively, and 
struck out former subpar. (F) which provided that acquisition expenses 
for life insurance companies be capitalized and amortized in accordance 
with the treatment generally required under generally accepted 
accounting principles as if this subparagraph applied to all taxable 
years.
    Subsec. (h). Pub. L. 101-508, Sec. 11531(a), added subsec. (h).
    1989--Subsec. (a)(3). Pub. L. 101-239, Sec. 7815(e)(2)(B), 
substituted ``The first sentence of this paragraph shall not'' for ``The 
preceding sentence shall not''.
    Pub. L. 101-239, Sec. 7815(e)(2)(A), made clarifying amendment to 
directory language of Pub. L. 100-647, Sec. 5041(b)(4), see 1988 
Amendment note below.
    Pub. L. 101-239, Sec. 7612(c)(1), struck out ``with respect to which 
the requirements of clauses (i) and (ii) of section 460(e)(1)(B) are 
met'' after ``section 460(e)(6))''.
    Subsec. (b)(2)(D). Pub. L. 101-239, Sec. 7612(d)(1), added subpar. 
(D).
    Subsec. (b)(3). Pub. L. 101-239, Sec. 7811(d)(3), inserted after 
first sentence ``Section 422A(c)(2) shall apply in any case where the 
disposition and the inclusion for purposes of this part are within the 
same taxable year and such section shall not apply in any other case.'' 
and substituted ``this paragraph'' for ``the preceding sentence'' in 
last sentence.
    Subsec. (g)(4)(A)(i). Pub. L. 101-239, Sec. 7611(a)(1)(A), amended 
cl. (i) generally. Prior to amendment cl. (i) read as follows: ``The 
depreciation deduction with respect to any property placed in service in 
a taxable year beginning after 1989 shall be determined under whichever 
of the following methods yields deductions with a smaller present value:
        ``(I) The alternative system of section 168(g), or
        ``(II) The method used for book purposes.''
    Subsec. (g)(4)(A)(iii). Pub. L. 101-239, Sec. 7611(a)(2), inserted 
``and which is placed in service in a taxable year beginning before 
1990'' after ``thereof) applies''.
    Subsec. (g)(4)(A)(v) to (vii). Pub. L. 101-239, Sec. 7611(a)(1)(B), 
redesignated cl. (vii) as (v), and struck out former cl. (v), which 
related to use of slower method if used for book purposes, and cl. (vi), 
which related to election to have cumulative limitation.
    Subsec. (g)(4)(B)(i). Pub. L. 101-239, Sec. 7611(f)(2), inserted at 
end ``The preceding sentence shall not apply in the case of any amount 
excluded from gross income under section 108 (or the corresponding 
provisions of prior law).''
    Subsec. (g)(4)(B)(iii). Pub. L. 101-239, Sec. 7611(f)(3), repealed 
cl. (iii) which read as follows: ``In the case of any annuity contract, 
the income on such contract (as determined under section 72(u)(2)) shall 
be treated as includible in gross income for such year. The preceding 
sentence shall not apply to any annuity contract which is held under a 
plan described in section 403(a) or which is described in section 
72(u)(3)(C).''
    Subsec. (g)(4)(C)(ii). Pub. L. 101-239, Sec. 7611(d), amended cl. 
(ii) generally. Prior to amendment, cl. (ii) read as follows: ``Clause 
(i) shall not apply to any deduction allowable under section 243 or 245 
for a 100-percent dividend--
        ``(I) if the corporation receiving such dividend and the 
    corporation paying such dividend could not be members of the same 
    affiliated group under section 1504 by reason of section 1504(b),
        ``(II) but only to the extent such dividend is attributable to 
    income of the paying corporation which is subject to tax under this 
    chapter (determined after the application of sections 936 and 921).
For purposes of the preceding sentence, the term `100 percent dividend' 
means any dividend if the percentage used for purposes of determining 
the amount allowable as a deduction under section 243 or 245 with 
respect to such dividend is 100 percent.''
    Subsec. (g)(4)(C)(iv). Pub. L. 101-239, Sec. 7611(e), added cl. 
(iv).
    Subsec. (g)(4)(D). Pub. L. 101-239, Sec. 7611(b), amended subpar. 
(D) generally, in cl. (i), substituting provisions directing that 
adjustments in section 312(n)(2)(A) be applied, for provisions directing 
adjustments in section 312(n) be applied, with certain exceptions, in 
cl. (ii), substituting provisions directing that sections 173 and 248 
not apply to expenditures paid or incurred in taxable years beginning 
after December 31, 1989, for material relating to special rule for 
intangible drilling costs and mineral exploration and development costs, 
and adding cls. (iii) and (iv).
    Subsec. (g)(4)(D)(i)(IV), (V). Pub. L. 101-239, Sec. 7815(e)(4), 
added subcl. (IV) relating to inapplicability of pars. (6) to (8) and 
struck out former subcls. (IV) and (V), which read as follows:
    ``(IV) paragraph (6) shall apply only to contracts entered into on 
or after March 1, 1986, and
    ``(V) paragraphs (7) and (8) shall not apply.''
    Subsec. (g)(4)(G). Pub. L. 101-239, Sec. 7611(c), amended subpar. 
(G) generally. Prior to amendment, subpar. (G) read as follows: ``The 
allowances for depletion with respect to any property placed in service 
in a taxable year beginning after 1989, shall be determined under 
whichever of the following methods yields deductions with a smaller 
present value:
        ``(i) cost depletion determined under section 611, or
        ``(ii) the method used for book purposes.''
    Subsec. (g)(4)(H). Pub. L. 101-239, Sec. 7205(b), added cl. (ii) and 
concluding provision and struck out former cl. (ii) and concluding 
provision which read as follows:
    ``(ii)(I) the aggregate adjusted bases of the assets of such 
corporation (immediately after the change), exceed
    ``(II) the value of the stock of such corporation (as determined for 
purposes of section 382), properly adjusted for liabilities and other 
relevant items,
then the adjusted basis of each asset of such corporation (as of such 
time) shall be its proportionate share (determined on the basis of 
respective fair market values) of the amount referred to in clause 
(ii)(II).''
    Subsec. (g)(4)(H)(i). Pub. L. 101-239, Sec. 7611(f)(1), substituted 
``in a taxable year beginning after 1989'' for ``after the date of the 
enactment of the Tax Reform Act of 1986''.
    Subsec. (g)(5)(A). Pub. L. 101-239, Sec. 7611(f)(4), redesignated 
subpar. (B) as (A) and struck out former subpar. (A) which defined 
``book purposes''.
    Subsec. (g)(5)(B). Pub. L. 101-239, Sec. 7611(f)(4), redesignated 
subpar. (D) as (B). Former subpar. (B) redesignated (A).
    Subsec. (g)(5)(C). Pub. L. 101-239, Sec. 7611(f)(4), struck out 
subpar. (C) which read as follows: ``Present value.--Present value shall 
be determined as of the time the property is placed in service (or, if 
later, as of the beginning of the first taxable year beginning after 
1989) and under regulations prescribed by the Secretary.''
    Subsec. (g)(5)(D). Pub. L. 101-239, Sec. 7611(f)(4), redesignated 
subpar. (D) as (B).
    1988--Subsec. (a)(1)(A)(i). Pub. L. 100-647, Sec. 1007(b)(15), 
substituted ``personal'' for ``real'' in heading.
    Subsec. (a)(1)(C)(i). Pub. L. 100-647, Sec. 1002(a)(12), inserted 
``by reason of section 203, 204, or 251(d) of such Act'' after ``do not 
apply''.
    Subsec. (a)(3). Pub. L. 100-647, Sec. 5041(b)(4), as amended by Pub. 
L. 101-239, Sec. 7815(e)(2)(A), inserted at end ``The preceding sentence 
shall not apply to any home construction contract (as defined in section 
460(e)(6)) with respect to which the requirements of clauses (i) and 
(ii) of section 460(e)(1)(B) are met.''
    Pub. L. 100-647, Sec. 1007(b)(1), inserted at end ``For purposes of 
the preceding sentence, in the case of a contract described in section 
460(e)(1), the percentage of the contract completed shall be determined 
under section 460(b)(2) by using the simplified procedures for 
allocation of costs prescribed under section 460(b)(4).''
    Subsec. (a)(8). Pub. L. 100-647, Sec. 1007(b)(19), added par. (8).
    Subsec. (b)(1). Pub. L. 100-647, Sec. 1007(b)(16), struck out 
``itemized'' after ``Limitation on'' in heading.
    Subsec. (b)(1)(C)(ii). Pub. L. 100-647, Sec. 2004(b)(2), substituted 
``163(h)(5)'' for ``163(h)(6)''.
    Subsec. (b)(1)(C)(iii). Pub. L. 100-647, Sec. 1007(b)(4), 
substituted ``specified private activity bond'' for ``specified activity 
bond'' before ``under'', and ``57(a)(5)(B)'' for ``56(a)(5)(B)''.
    Subsec. (b)(1)(C)(iv), (v). Pub. L. 100-647, Sec. 1007(b)(3), added 
cls. (iv) and (v).
    Subsec. (b)(1)(E). Pub. L. 100-647, Sec. 1007(b)(2), substituted 
``and deduction for personal exemptions not allowed'' for ``not 
allowed'' in heading and amended text generally. Prior to amendment, 
text read as follows: ``The standard deduction provided in section 63(c) 
shall not be allowed.''
    Subsec. (b)(3). Pub. L. 100-647, Sec. 1007(b)(14)(A), added par. 
(3).
    Subsec. (c)(1). Pub. L. 100-647, Sec. 1007(b)(13)(A), substituted 
``adjusted current earnings'' for ``adjusted earnings and profits'' in 
heading.
    Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 1007(b)(13)(B), substituted 
``Adjusted current earnings'' for ``Adjusted earnings and profits'' in 
heading.
    Subsec. (d)(2)(A). Pub. L. 100-647, Sec. 1007(b)(5), struck out 
``(other than subsection (a)(6) thereof)'' after ``for such year'' in 
cl. (ii) and inserted sentence at end providing that an item of tax 
preference shall be taken into account under clause (ii).
    Subsec. (e)(1). Pub. L. 100-647, Sec. 2004(b)(3)(A), substituted 
``improving'' for ``rehabilitating'' in introductory text.
    Pub. L. 100-647, Sec. 1007(b)(6)(A)(i), inserted ``qualified 
residence interest (as defined in section 163(h)(3)) and is'' after 
``interest which is'' in introductory text.
    Subsec. (e)(1)(A). Pub. L. 100-647, Sec. 2004(b)(3)(B), struck out 
``or is paid'' after ``accrues''.
    Subsec. (e)(1)(B). Pub. L. 100-647, Sec. 1007(b)(6)(A)(ii), 
substituted ``section 163(h)(4)'' for ``section 163(h)(3)''.
    Subsec. (e)(3). Pub. L. 100-647, Sec. 1007(b)(6)(B), substituted 
``interest which is qualified residence interest (as defined in section 
163(h)(3)) and is paid or accrued'' for ``interest paid or accrued''.
    Subsec. (f)(2)(B). Pub. L. 100-647, Sec. 2001(c)(3)(A), inserted at 
end ``No adjustment shall be made under this subparagraph for the tax 
imposed by section 59A.''
    Pub. L. 100-647, Sec. 1007(b)(7), inserted ``(otherwise eligible for 
the credit provided by section 901 without regard to section 901(j))'' 
after ``any such taxes''.
    Subsec. (f)(2)(F). Pub. L. 100-647, Sec. 1007(b)(11)(A), substituted 
``Treatment of taxes on dividends from 936 corporations'' for 
``Treatment of dividends from 936 corporations'' in heading and amended 
text generally, substituting cls. (i) to (iii) for former cls. (i) and 
(ii).
    Subsec. (f)(2)(I), (J). Pub. L. 100-647, Sec. 6303(a), added subpar. 
(I) and redesignated former subpar. (I) as (J).
    Subsec. (f)(3)(A)(iii). Pub. L. 100-647, Sec. 1007(b)(8), inserted 
``for a substantial nontax purpose'' after ``an income statement''.
    Subsec. (f)(3)(B). Pub. L. 100-647, Sec. 1007(b)(9), substituted 
``this subsection'' for ``paragraph (3)(A)'' in penultimate sentence.
    Subsec. (f)(3)(C). Pub. L. 100-647, Sec. 1007(b)(10), inserted at 
end ``If the taxpayer has 2 or more statements described in the clause 
(or subclause) with the lowest number designation, the applicable 
financial statement shall be the one of such statements specified in 
regulations.''
    Subsec. (g)(4)(A)(vi), (vii). Pub. L. 100-647, Sec. 1007(b)(17), 
added cls. (vi) and (vii).
    Subsec. (g)(4)(B)(iii). Pub. L. 100-647, Sec. 6079(a)(1), amended 
last sentence generally, inserting ``which is'' after ``any annuity 
contract'' and ``or which is described in section 72(u)(3)(C)'' after 
``in section 403(a)''.
    Pub. L. 100-647, Sec. 1007(b)(12), inserted at end ``The preceding 
sentence shall not apply to any annuity contract held under a plan 
described in section 403(a).''
    Subsec. (g)(4)(C)(iii). Pub. L. 100-647, Sec. 1007(b)(11)(B), 
substituted ``clause (i)'' for ``clause (ii)(I)''.
    Subsec. (g)(4)(I). Pub. L. 100-647, Sec. 1007(b)(18), added subpar. 
(I).
    1987--Subsec. (a)(6). Pub. L. 100-203, Sec. 10202(d), amended par. 
(6) generally. Prior to amendment, par. (6) read as follows: ``In the 
case of any--
        ``(A) disposition after March 1, 1986, of property described in 
    section 1221(1), or
        ``(B) other disposition if an obligation arising from such 
    disposition would be an applicable installment obligation (as 
    defined in section 453C(e)) to which section 453C applies,
income from such disposition shall be determined without regard to the 
installment method under section 453 or 453A and all payments to be 
received for the disposition shall be deemed received in the taxable 
year of the disposition. This paragraph shall not apply to any 
disposition with respect to which an election is in effect under section 
453C(e)(4).''
    Subsec. (f)(2)(H), (I). Pub. L. 100-203, Sec. 10243(a), added 
subpar. (H) and redesignated former subpar. (H) as (I).


                    Effective Date of 2000 Amendments

    Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 314(g)], Dec. 21, 
2000, 114 Stat. 2763, 2763A-643, provided that: ``The amendments made by 
this section [amending this section and sections 403, 414, 415, 3405, 
6211 and 7436 of this title and provisions set out as a note under 
section 1 of this title] shall take effect as if included in the 
provisions of the Taxpayer Relief [Act] of 1997 [Pub. L. 105-34] to 
which they relate.''
    Amendment by Pub. L. 106-519 applicable to transactions after Sept. 
30, 2000, with special rules relating to existing foreign sales 
corporations, see section 5 of Pub. L. 106-519, set out as an Effective 
Date note under section 941 of this title.


                    Effective Date of 1997 Amendment

    Amendment by section 312(d)(1) of Pub. L. 105-34 applicable to sales 
and exchanges after May 6, 1997, with certain exceptions, see section 
312(d) of Pub. L. 105-34, set out as a note under section 121 of this 
title.
    Section 403(b) of Pub. L. 105-34 provided that:
    ``(1) In general.--The amendment made by this section [amending this 
section] shall apply to dispositions in taxable years beginning after 
December 31, 1987.
    ``(2) Special rule for 1987.--In the case of taxable years beginning 
in 1987, the last sentence of section 56(a)(6) of the Internal Revenue 
Code of 1986 (as in effect for such taxable years) shall be applied by 
inserting `or in the case of a taxpayer using the cash receipts and 
disbursements method of accounting, any disposition described in section 
453C(e)(1)(B)(ii)' after `section 453C(e)(4)'.''
    Section 1212(b) of Pub. L. 105-34 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1997.''


                    Effective Date of 1996 Amendment

    Amendment by section 1601(b)(2)(B), (C) of Pub. L. 104-188 
applicable to taxable years beginning after Dec. 31, 1995, except as 
otherwise provided, see section 1601(c) of Pub. L. 104-188, set out as 
an Effective Date note under section 30A of this title.
    Amendment by section 1621(b)(2) of Pub. L. 104-188 effective Sept. 
1, 1997, see section 1621(d) of Pub. L. 104-188, set out as a note under 
section 26 of this title.
    Amendment by section 1702(c)(1), (e)(1)(A), (g)(4), and (h)(12) of 
Pub. L. 104-188 effective, except as otherwise expressly provided, as if 
included in the provision of the Revenue Reconciliation Act of 1990, 
Pub. L. 101-508, title XI, to which such amendment relates, see section 
1702(i) of Pub. L. 104-188, set out as a note under section 38 of this 
title.


                    Effective Date of 1993 Amendment

    Section 13115(b) of Pub. L. 103-66 provided that:
    ``(1) In general.--Except as provided in paragraph (2), the 
amendments made by this section [amending this section] shall apply to 
property placed in service after December 31, 1993.
    ``(2) Coordination with transitional rules.--The amendments made by 
this section shall not apply to any property to which paragraph (1) of 
section 56(a) of the Internal Revenue Code of 1986 does not apply by 
reason of subparagraph (C)(i) thereof.''
    Amendment by section 13171(b) of Pub. L. 103-66 applicable to 
contributions made after June 30, 1992, except that in case of any 
contribution of capital gain property which is not tangible personal 
property, such amendment applicable only if the contribution is made 
after Dec. 31, 1992, see section 13171(d) of Pub. L. 103-66, set out as 
a note under section 53 of this title.
    Section 13227(f) of Pub. L. 103-66 provided that: ``The amendments 
made by this section [amending this section and sections 904, 936, and 
7652 of this title] shall apply to taxable years beginning after 
December 31, 1993; except that the amendment made by subsection (e) 
[amending section 7652 of this title] shall take effect on October 1, 
1993.''


                    Effective Date of 1992 Amendment

    Section 1915(d) of Pub. L. 102-486 provided that: ``The amendments 
made by this section [amending this section and sections 57, 59, and 59A 
of this title] shall apply to taxable years beginning after December 31, 
1992.''


                    Effective Date of 1990 Amendment

    Amendment by section 11103(b) of Pub. L. 101-508 applicable to 
taxable years beginning after Dec. 31, 1990, see section 11103(e) of 
Pub. L. 101-508, set out as a note under section 1 of this title.
    Section 11301(d)(2) of Pub. L. 101-508 provided that:
    ``(A) In general.--The amendment made by subsection (b) [amending 
this section] shall apply to taxable years beginning on or after 
September 30, 1990, except that, in the case of a small insurance 
company, such amendment shall apply to taxable years beginning after 
December 31, 1989. For purposes of this paragraph, the term `small 
insurance company' means any insurance company which meets the 
requirements of section 806(a)(3) of the Internal Revenue Code of 1986; 
except that paragraph (2) of section 806(c) of such Code shall not 
apply.
    ``(B) Special rules for year which includes september 30, 1990.--In 
the case of any taxable year which includes September 30, 1990, the 
amount of acquisition expenses which is required to be capitalized under 
section 56(g)(4)(F) of the Internal Revenue Code of 1986 (as in effect 
before the amendment made by subsection (b)) by a company which is not a 
small insurance company shall be the amount which bears the same ratio 
to the amount which (but for this subparagraph) would be so required to 
be capitalized as the number of days in such taxable year before 
September 30, 1990, bears to the total number of days in such taxable 
year. A similar reduction shall be made in the amount amortized for such 
taxable year under such section 56(g)(4)(F).''
    Section 11531(c) of Pub. L. 101-508 provided that: ``The amendments 
made by this section [amending this section and sections 59 and 59A of 
this title] shall apply to taxable years beginning after December 31, 
1990.''
    Section 11704(b) of Pub. L. 101-508 provided that: ``The amendments 
made by this section [amending this section, sections 172, 351, 413, 
461, 469, 597, 857, 860D, 860G, 892, 927, 936, 1017, 1245, 1441, 2056A, 
2642, 3231, 4091, 4093, 5061, 6013, 6038A, 6039D, 6045, 6323, 6332, 
6655, 7519, 7522, 7608, and 7701 of this title, and provisions set out 
as a note under section 231n of Title 45, Railroads] shall take effect 
on the date of the enactment of this Act.''
    Amendment by section 11812(b)(4) of Pub. L. 101-508 applicable to 
property placed in service after Nov. 5, 1990, but not applicable to any 
property to which section 168 of this title does not apply by reason of 
subsec. (f)(5) of section 168, and not applicable to rehabilitation 
expenditures described in section 252(f)(5) of Pub. L. 99-514, see 
section 11812(c) of Pub. L. 101-508, set out as a note under section 42 
of this title.


                    Effective Date of 1989 Amendment

    Section 7205(c) of Pub. L. 101-239 provided that:
    ``(1) In general.--Except as otherwise provided in this subsection, 
the amendments made by this section [amending this section and section 
382 of this title] shall apply to ownership changes and acquisitions 
after October 2, 1989, in taxable years ending after such date.
    ``(2) Binding contract.--The amendments made by this section shall 
not apply to any ownership change or acquisition pursuant to a written 
binding contract in effect on October 2, 1989, and at all times 
thereafter before such change or acquisition.
    ``(3) Bankruptcy proceedings.--In the case of a reorganization 
described in section 368(a)(1)(G) of the Internal Revenue Code of 1986, 
or an exchange of debt for stock in a title 11 or similar case (as 
defined in section 368(a)(3) of such Code), the amendments made by this 
section shall not apply to any ownership change resulting from such a 
reorganization or proceeding if a petition in such case was filed with 
the court before October 3, 1989.
    ``(4) Subsidiaries of bankrupt parent.--The amendments made by this 
section shall not apply to any built-in loss of a corporation which is a 
member (on October 2, 1989) of an affiliated group the common parent of 
which (on such date) was subject to title 11 or similar case (as defined 
in section 368(a)(3) of such Code). The preceding sentence shall apply 
only if the ownership change or acquisition is pursuant to the plan 
approved in such proceeding and is before the date 2 years after the 
date on which the petition which commenced such proceeding was filed.''
    Section 7611(g) of Pub. L. 101-239 provided that:
    ``(1) In general.--Except as otherwise provided in this subsection, 
the amendments made by this section [amending this section and sections 
59 and 312 of this title] shall apply to taxable years beginning after 
December 31, 1989.
    ``(2) Intangible drilling costs.--The amendments made by subsection 
(f)(5) [amending sections 59 and 312 of this title] shall apply to costs 
paid or incurred in taxable years beginning after December 31, 1989.
    ``(3) Regulations on earnings and profits rules.--Not later than 
March 15, 1991, the Secretary of the Treasury or his delegate shall 
prescribe initial regulations providing guidance as to which items of 
income are included in adjusted current earnings under section 
56(g)(4)(B)(i) of the Internal Revenue Code of 1986 and which items of 
deduction are disallowed under section 56(g)(4)(C) of such Code.''
    Section 7612(c)(2) of Pub. L. 101-239 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to contracts 
entered into in taxable years beginning after September 30, 1990.''
    Section 7612(d)(2) of Pub. L. 101-239 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to taxable 
years beginning after December 31, 1990.''
    Amendment by sections 7811(d)(3) and 7815(e)(2), (4) of Pub. L. 101-
239 effective, except as otherwise provided, as if included in the 
provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. 
L. 100-647, to which such amendment relates, see section 7817 of Pub. L. 
101-239, set out as a note under section 1 of this title.


                    Effective Date of 1988 Amendment

    Section 1007(b)(14)(C) of Pub. L. 100-647 provided that: ``The 
amendments made by this paragraph [amending this section and section 57 
of this title] shall apply with respect to options exercised after 
December 31, 1987.''
    Amendment by sections 1002(a)(12) and 1007(b)(1)-(13), (15)-(19) 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 2001(e) of Pub. L. 100-647 provided that: ``Except as 
otherwise provided in this section, the amendments made by this section 
[amending this section, sections 59A, 882, 4041, 4081, 4091, 4662, 4672, 
6416, 6421, and 6427 of this title, and provisions set out as a note 
under section 4081 of this title] shall take effect as if included in 
the provision of the Superfund Revenue Act of 1986 [Pub. L. 99-499, 
title V] to which it relates.''
    Section 2004(u) of Pub. L. 100-647 provided that: ``Except as 
otherwise provided in this section, any amendment made by this section 
[amending this section, sections 163, 244, 280H, 301, 304, 355, 384, 
444, 453, 453A, 469, 514, 811, 812, 816, 842, 904, 1201, 1363, 1503, 
1561, 4093, 5113, 5123, 5276, 5881, 6427, 6655, 7519, and 7704 of this 
title, and provisions set out as notes under sections 21, 219, 243, 301, 
304, 444, 453, 1503, and 7704 of this title] shall take effect as if 
included in the provisions of the Revenue Act of 1987 [Pub. L. 100-203, 
title X] to which such amendment relates.''
    Amendment by section 5041(b)(4) of Pub. L. 100-647 applicable to 
contracts entered into on or after June 21, 1988, but not applicable to 
any contract resulting from the acceptance of a bid made before June 21, 
1988, if the bid could not have been revoked or altered at any time on 
or after June 21, 1988, and not applicable in the case of a qualified 
ship contract (as defined in section 10203(b)(2)(B) of Pub. L. 100-203, 
set out as a note under section 460 of this title), see section 5041(e) 
of Pub. L. 100-647, set out as a note under section 460 of this title.
    Section 6079(a)(2) of Pub. L. 100-647 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if 
included in the amendments made by section 701 of the Reform Act [Pub. 
L. 99-514].''
    Section 6303(b) of Pub. L. 100-647 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1986.''


                    Effective Date of 1987 Amendment

    Amendment by section 10202(d) of Pub. L. 100-203 applicable to 
dispositions in taxable years beginning after Dec. 31, 1986, with 
coordination with Tax Reform Act of 1986, see section 10202(e)(4), (5) 
of Pub. L. 100-203, set out as a note under section 453 of this title.
    Section 10243(b) of Pub. L. 100-203 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1987.''


                             Effective Date

    Section applicable to taxable years beginning after Dec. 31, 1986, 
with certain exceptions and qualifications, see section 701(f) of Pub. 
L. 99-514, set out as a note under section 55 of this title.


                            Savings Provision

    For provisions that nothing in amendment by sections 11801 and 11812 
of Pub. L. 101-508 be construed to affect treatment of certain 
transactions occurring, property acquired, or items of income, loss, 
deduction, or credit taken into account prior to Nov. 5, 1990, for 
purposes of determining liability for tax for periods ending after Nov. 
5, 1990, see section 11821(b) of Pub. L. 101-508, set out as a note 
under section 29 of this title.


 Application of Subsection (g)(1) and (3) to Taxable Years Beginning in 
                              1991 and 1992

    Section 1702(e)(1)(B) of Pub. L. 104-188 provided that: ``For 
purposes of applying sections 56(g)(1) and 56(g)(3) of the Internal 
Revenue Code of 1986 with respect to taxable years beginning in 1991 and 
1992, the reference in such sections to the alternative tax net 
operating loss deduction shall be treated as including a reference to 
the deduction under section 56(h) of such Code as in effect before the 
amendments made by section 1915 of the Energy Policy Act of 1992 [Pub. 
L. 102-486].''


           Installment Sales; Taxable Years Beginning in 1987

    Section 7821(a)(5) of Pub. L. 101-239 provided that: ``In the case 
of taxable years beginning in 1987, the reference to section 453 
contained in section 56(a)(6) of the Internal Revenue Code of 1986 shall 
be treated as including a reference to section 453A.''


  Applicability of Certain Amendments by Pub. L. 99-514 in Relation to 
                   Treaty Obligations of United States

    For applicability of amendment by section 701(a) of Pub. L. 99-514 
[enacting this section] notwithstanding any treaty obligation of the 
United States in effect on Oct. 22, 1986, with provision that for such 
purposes any amendment by title I of Pub. L. 100-647 be treated as if it 
had been included in the provision of Pub. L. 99-514 to which such 
amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100-647, set 
out as a note under section 861 of this title.


           Study of Book and Earnings and Profits Adjustments

    Section 702 of Pub. L. 99-514 required Secretary of the Treasury or 
his delegate to conduct a study of operation and effect of provisions of 
sections 56(f) and 56(g) of the Internal Revenue Code of 1986, prior to 
repeal by Pub. L. 101-508, title XI, Sec. 11832(4), Nov. 5, 1990, 104 
Stat. 1388-559.

                  Section Referred to in Other Sections

    This section is referred to in sections 53, 55, 57, 58, 59, 59A, 
168, 382, 772, 847, 848, 1400I of this title.
