
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC57]

 
                     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. 57. Items of tax preference


(a) General rule

    For purposes of this part, the items of tax preference determined 
under this section are--

                            (1) Depletion

        With respect to each property (as defined in section 614), the 
    excess of the deduction for depletion allowable under section 611 
    for the taxable year over the adjusted basis of the property at the 
    end of the taxable year (determined without regard to the depletion 
    deduction for the taxable year). Effective with respect to taxable 
    years beginning after December 31, 1992, this paragraph shall not 
    apply to any deduction for depletion computed in accordance with 
    section 613A(c).

                    (2) Intangible drilling costs

        (A) In general

            With respect to all oil, gas, and geothermal properties of 
        the taxpayer, the amount (if any) by which the amount of the 
        excess intangible drilling costs arising in the taxable year is 
        greater than 65 percent of the net income of the taxpayer from 
        oil, gas, and geothermal properties for the taxable year.

        (B) Excess intangible drilling costs

            For purposes of subparagraph (A), the amount of the excess 
        intangible drilling costs arising in the taxable year is the 
        excess of--
                (i) the intangible drilling and development costs paid 
            or incurred in connection with oil, gas, and geothermal 
            wells (other than costs incurred in drilling a nonproductive 
            well) allowable under section 263(c) or 291(b) for the 
            taxable year, over
                (ii) the amount which would have been allowable for the 
            taxable year if such costs had been capitalized and straight 
            line recovery of intangibles (as defined in subsection (b)) 
            had been used with respect to such costs.

        (C) Net income from oil, gas, and geothermal properties

            For purposes of subparagraph (A), the amount of the net 
        income of the taxpayer from oil, gas, and geothermal properties 
        for the taxable year is the excess of--
                (i) the aggregate amount of gross income (within the 
            meaning of section 613(a)) from all oil, gas, and geothermal 
            properties of the taxpayer received or accrued by the 
            taxpayer during the taxable year, over
                (ii) the amount of any deductions allocable to such 
            properties reduced by the excess described in subparagraph 
            (B) for such taxable year.

        (D) Paragraph applied separately with respect to geothermal 
                properties and oil and gas properties

            This paragraph shall be applied separately with respect to--
                (i) all oil and gas properties which are not described 
            in clause (ii), and
                (ii) all properties which are geothermal deposits (as 
            defined in section 613(e)(2)).

        (E) Exception for independent producers

            In the case of any oil or gas well--
            (i) In general

                In the case of any taxable year beginning after December 
            31, 1992, this paragraph shall not apply to any taxpayer 
            which is not an integrated oil company (as defined in 
            section 291(b)(4)).
            (ii) Limitation on benefit

                The reduction in alternative minimum taxable income by 
            reason of clause (i) for any taxable year shall not exceed 
            40 percent (30 percent in case of taxable years beginning in 
            1993) of the alternative minimum taxable income for such 
            year determined without regard to clause (i) and the 
            alternative tax net operating loss deduction under section 
            56(a)(4).

              [(3) Repealed. Pub. L. 100-647, title I, 
             Sec. 1007(b)(14)(B), Nov. 10, 1988, 102 Stat. 3430]

     [(4) Repealed. Pub. L. 104-188, title I, Sec. 1616(b)(3), 
                       Aug. 20, 1996, 110 Stat. 1856]

                       (5) Tax-exempt interest

        (A) In general

            Interest on specified private activity bonds reduced by any 
        deduction (not allowable in computing the regular tax) which 
        would have been allowable if such interest were includible in 
        gross income.

        (B) Treatment of exempt-interest dividends

            Under regulations prescribed by the Secretary, any exempt-
        interest dividend (as defined in section 852(b)(5)(A)) shall be 
        treated as interest on a specified private activity bond to the 
        extent of its proportionate share of the interest on such bonds 
        received by the company paying such dividend.

        (C) Specified private activity bonds

            (i) In general

                For purposes of this part, the term ``specified private 
            activity bond'' means any private activity bond (as defined 
            in section 141) which is issued after August 7, 1986, and 
            the interest on which is not includible in gross income 
            under section 103.
            (ii) Exception for qualified 501(c)(3) bonds

                For purposes of clause (i), the term ``private activity 
            bond'' shall not include any qualified 501(c)(3) bond (as 
            defined in section 145).
            (iii) Exception for refundings

                For purposes of clause (i), the term ``private activity 
            bond'' shall not include any refunding bond (whether a 
            current or advance refunding) if the refunded bond (or in 
            the case of a series of refundings, the original bond) was 
            issued before August 8, 1986.
            (iv) Certain bonds issued before September 1, 1986

                For purposes of this subparagraph, a bond issued before 
            September 1, 1986, shall be treated as issued before August 
            8, 1986, unless such bond would be a private activity bond 
            if--
                    (I) paragraphs (1) and (2) of section 141(b) were 
                applied by substituting ``25 percent'' for ``10 
                percent'' each place it appears,
                    (II) paragraphs (3), (4), and (5) of section 141(b) 
                did not apply, and
                    (III) subparagraph (B) of section 141(c)(1) did not 
                apply.

      (6) Accelerated depreciation or amortization on certain 
              property placed in service before January 1, 1987

        The amounts which would be treated as items of tax preference 
    with respect to the taxpayer under paragraphs (2), (3), (4), and 
    (12) of this subsection (as in effect on the day before the date of 
    the enactment of the Tax Reform Act of 1986). The preceding sentence 
    shall not apply to any property to which section 56(a)(1) or (5) 
    applies.

     (7) Exclusion for gains on sale of certain small business 
                                    stock

        An amount equal to 42 percent of the amount excluded from gross 
    income for the taxable year under section 1202. In the case of stock 
    the holding period of which begins after December 31, 2000 
    (determined with the application of the last sentence of section 
    1(h)(2)(B)), the preceding sentence shall be applied by substituting 
    ``28 percent'' for ``42 percent''.

(b) Straight line recovery of intangibles defined

    For purposes of paragraph (2) of subsection (a)--

                           (1) In general

        The term ``straight line recovery of intangibles'', when used 
    with respect to intangible drilling and development costs for any 
    well, means (except in the case of an election under paragraph (2)) 
    ratable amortization of such costs over the 120-month period 
    beginning with the month in which production from such well begins.

                            (2) Election

        If the taxpayer elects with respect to the intangible drilling 
    and development costs for any well, the term ``straight line 
    recovery of intangibles'' means any method which would be permitted 
    for purposes of determining cost depletion with respect to such well 
    and which is selected by the taxpayer for purposes of subsection 
    (a)(2).

(Added Pub. L. 99-514, title VII, Sec. 701(a), Oct. 22, 1986, 100 Stat. 
2333; amended Pub. L. 100-647, title I, Sec. 1007(b)(14)(B), (c), Nov. 
10, 1988, 102 Stat. 3430, 3432; Pub. L. 101-508, title XI, Secs. 11344, 
11801(c)(12)(A), 11815(b)(3), Nov. 5, 1990, 104 Stat. 1388-472, 1388-
527, 1388-558; Pub. L. 102-227, title I, Sec. 112, Dec. 11, 1991, 105 
Stat. 1689; Pub. L. 102-486, title XIX, Sec. 1915(a)(1), (b)(1), Oct. 
24, 1992, 106 Stat. 3023, 3024; Pub. L. 103-66, title XIII, 
Secs. 13113(b)(1), 13171(a), Aug. 10, 1993, 107 Stat. 429, 454; Pub. L. 
104-188, title I, Sec. 1616(b)(3), Aug. 20, 1996, 110 Stat. 1856; Pub. 
L. 105-34, title III, Sec. 311(b)(2)(B), Aug. 5, 1997, 111 Stat. 835; 
Pub. L. 105-206, title VI, Sec. 6005(d)(3), July 22, 1998, 112 Stat. 
805.)

                       References in Text

    The date of the enactment of the Tax Reform Act of 1986, referred to 
in subsec. (a)(6), is the date of enactment of Pub. L. 99-514, which was 
approved Oct. 22, 1986.


                            Prior Provisions

    A prior section 57, added Pub. L. 91-172, title III, Sec. 301(a), 
Dec. 30, 1969, 83 Stat. 581; amended Pub. L. 92-178, title III, 
Secs. 303(b), 304(a)(1), (b)(1), (d), Dec. 10, 1971, 85 Stat. 522-524; 
Pub. L. 94-455, title III, Sec. 301(c)(1)-(4)(A), (C), title XIX, 
Secs. 1901(b)(33)(A), (B), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1550-
1552, 1800, 1834; Pub. L. 95-30, title I, Sec. 101(d)(5), title III, 
Sec. 308(a), title IV, Sec. 402(a)(5), May 23, 1977, 91 Stat. 133, 153, 
155; Pub. L. 95-600, title III, Sec. 301(b)(2), title IV, 
Secs. 402(b)(1), 421(b), title VII, Sec. 701(b)(1), (3), (4), (f)(3)(D), 
Nov. 6, 1978, 92 Stat. 2820, 2868, 2874, 2898, 2899, 2901; Pub. L. 95-
618, title IV, Sec. 402(b), Nov. 9, 1978, 92 Stat. 3202; Pub. L. 96-222, 
title I, Secs. 104(a)(4)(E), (F), 107(a)(1)(A), Apr. 1, 1980, 94 Stat. 
217, 222; Pub. L. 96-596, Sec. 3(a), Dec. 24, 1980, 94 Stat. 3475; Pub. 
L. 97-34, title I, Sec. 121(c)(1), title II, Secs. 205, 212(d)(2)(B), 
Aug. 13, 1981, 95 Stat. 197, 223, 239; Pub. L. 97-248, title II, 
Secs. 201(b), 204(b), Sept. 3, 1982, 96 Stat. 416, 426; Pub. L. 97-354, 
Sec. 5(a)(14), (15), Oct. 19, 1982, 96 Stat. 1693; Pub. L. 97-448, title 
I, Sec. 102(b)(1)(A), (3), (4), Jan. 12, 1983, 96 Stat. 2369, 2370; Pub. 
L. 98-369, div. A, title I, Secs. 16(b), 68(c), 111(e)(5)-(7), title V, 
Sec. 555(a)(2), title VII, Secs. 711(a)(3)(A), 722(a)(1), July 18, 1984, 
98 Stat. 505, 588, 633, 897, 942, 972; Pub. L. 99-121, title I, 
Sec. 103(b)(1)(B), (7), Oct. 11, 1985, 99 Stat. 509, 510; Pub. L. 99-
272, title XIII, Sec. 13208(a), Apr. 7, 1986, 100 Stat. 321; Pub. L. 99-
514, title XVIII, Secs. 1804(k)(3)(B)-(D), 1809(a)(3), Oct. 22, 1986, 
100 Stat. 2809, 2819, related to items of tax preference, prior to the 
general revision of this part by Pub. L. 99-514, Sec. 701(a).


                               Amendments

    1998--Subsec. (a)(7). Pub. L. 105-206 inserted at end ``In the case 
of stock the holding period of which begins after December 31, 2000 
(determined with the application of the last sentence of section 
1(h)(2)(B)), the preceding sentence shall be applied by substituting `28 
percent' for `42 percent'.''
    1997--Subsec. (a)(7). Pub. L. 105-34 substituted ``42 percent'' for 
``one-half''.
    1996--Subsec. (a)(4). Pub. L. 104-188 struck out par. (4) which read 
as follows: ``Reserves for losses on bad debts of financial 
institutions.--In the case of a financial institution to which section 
593 applies, the amount by which the deduction allowable for the taxable 
year for a reasonable addition to a reserve for bad debts exceeds the 
amount that would have been allowable had the institution maintained its 
bad debt reserve for all taxable years on the basis of actual 
experience.''
    1993--Subsec. (a)(6), (7). Pub. L. 103-66, Sec. 13171(a), 
redesignated pars. (7) and (8) as (6) and (7), respectively, and struck 
out heading and text of former par. (6). Text read as follows:
    ``(A) In general.--The amount by which the deduction allowable under 
section 170 or 642(c) would be reduced if all capital gain property were 
taken into account at its adjusted basis.
    ``(B) Capital gain property.--For purposes of subparagraph (A), the 
term `capital gain property' has the meaning given to such term by 
section 170(b)(1)(C)(iv). Such term shall not include any property to 
which an election under section 170(b)(1)(C)(iii) applies. In the case 
of any taxable year beginning in 1991, such term shall not include any 
tangible personal property. In the case of a contribution made before 
July 1, 1992, in a taxable year beginning in 1992, such term shall not 
include any tangible personal property.''
    Subsec. (a)(8). Pub. L. 103-66, Sec. 13171(a), redesignated par. (8) 
as (7).
    Pub. L. 103-66, Sec. 13113(b)(1), added par. (8).
    1992--Subsec. (a)(1). Pub. L. 102-486, Sec. 1915(a)(1), inserted at 
end ``Effective with respect to taxable years beginning after December 
31, 1992, this paragraph shall not apply to any deduction for depletion 
computed in accordance with section 613A(c).''
    Subsec. (a)(2)(E). Pub. L. 102-486, Sec. 1915(b)(1), added subpar. 
(E).
    1991--Subsec. (a)(6)(B). Pub. L. 102-227 inserted at end ``In the 
case of a contribution made before July 1, 1992, in a taxable year 
beginning in 1992, such term shall not include any tangible personal 
property.''
    1990--Subsec. (a)(2)(D)(ii). Pub. L. 101-508, Sec. 11815(b)(3), 
substituted ``section 613(e)(2)'' for ``section 613(e)(3)''.
    Subsec. (a)(4). Pub. L. 101-508, Sec. 11801(c)(12)(A), struck out 
``585 or'' after ``section''.
    Subsec. (a)(6)(B). Pub. L. 101-508, Sec. 11344, inserted at end ``In 
the case of any taxable year beginning in 1991, such term shall not 
include any tangible personal property.''
    1988--Subsec. (a)(3). Pub. L. 100-647, Sec. 1007(b)(14)(B), struck 
out par. (3) which related to incentive stock options.
    Subsec. (a)(5)(C)(i). Pub. L. 100-647, Sec. 1007(c)(2), amended cl. 
(i) generally. Prior to amendment, cl. (i) read as follows: ``For 
purposes of this part, the term `specified private activity bonds' means 
any private activity bond (as defined in section 141) issued after 
August 7, 1986.''
    Subsec. (a)(5)(C)(iii). Pub. L. 100-647, Sec. 1007(c)(1), inserted 
``(whether a current or advance refunding)'' after ``any refunding 
bond''.
    Subsec. (a)(6)(A). Pub. L. 100-647, Sec. 1007(c)(3), inserted ``or 
642(c)'' after ``section 170''.


                    Effective Date of 1998 Amendment

    Amendment by Pub. L. 105-206 effective, except as otherwise 
provided, as if included in the provisions of the Taxpayer Relief Act of 
1997, Pub. L. 105-34, to which such amendment relates, see section 6024 
of Pub. L. 105-206, set out as a note under section 1 of this title.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable to taxable years ending after 
May 6, 1997, see section 311(d) of Pub. L. 105-34, set out as a note 
under section 1 of this title.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 applicable to taxable years beginning 
after Dec. 31, 1995, see section 1616(c) of Pub. L. 104-188, set out as 
a note under section 593 of this title.


                    Effective Date of 1993 Amendment

    Amendment by section 13113(b)(1) of Pub. L. 103-66 applicable to 
stock issued after Aug. 10, 1993, see section 13113(e) of Pub. L. 103-
66, set out as a note under section 53 of this title.
    Amendment by section 13171(a) 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.


                    Effective Date of 1992 Amendment

    Amendment by Pub. L. 102-486 applicable to taxable years beginning 
after Dec. 31, 1992, see section 1915(d) of Pub. L. 102-486, set out as 
a note under section 56 of this title.


                    Effective Date of 1988 Amendment

    Amendment by section 1007(b)(14)(B) of Pub. L. 100-647 applicable 
with respect to options exercised after Dec. 31, 1987, see section 
1007(b)(14)(C) of Pub. L. 100-647, set out as a note under section 56 of 
this title.
    Amendment by section 1007(c) 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.


                             Effective Date

    Section applicable to taxable years beginning after Dec. 31, 1986, 
with certain exceptions and qualifications, but subsec. (a)(6) not to 
apply to any deduction attributable to contributions made before Aug. 
16, 1986, 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 11815 
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.


                         Transitional Provisions

    Section 1007(f)(4) of Pub. L. 100-647 provided that:
    ``(A) If any property to which this paragraph applies is placed in 
service in a taxable year which begins before January 1, 1987, and ends 
on or after August 1, 1986, the item of tax preference determined under 
section 57(a) of the Internal Revenue Code of 1954 (as in effect on the 
day before the date of the enactment of the Tax Reform Act of 1986 [Oct. 
22, 1986]) with respect to such property shall be the excess of--
        ``(i) the amount allowable as a deduction for depreciation or 
    amortization for such taxable year, over
        ``(ii) the amount which would be determined for such taxable 
    year under the rules of paragraph (1) or (5) (whichever is 
    appropriate) of section 56(a) of the Internal Revenue Code of 1954 
    (as amended by the Tax Reform Act of 1986 [Pub. L. 99-514]).
    ``(B) This paragraph shall apply to any property--
        ``(i) which is described in paragraph (4) or (12) of section 
    57(a) of the Internal Revenue Code of 1954 (as so in effect), and
        ``(ii) to which paragraph (1) or (5) of section 56(a) of the 
    Internal Revenue Code of 1986 would apply if the taxable year 
    referred to in subparagraph (A) began after December 31, 1986.''


  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.

                  Section Referred to in Other Sections

    This section is referred to in sections 1, 53, 55, 56, 58, 59, 148, 
149, 772 of this title.
