
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 106-554 Section 1(a)(7)[319(2)]]
[CITE: 26USC67]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
   PART I--DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE 
                              INCOME, ETC.
 
Sec. 67. 2-percent floor on miscellaneous itemized deductions


(a) General rule

    In the case of an individual, the miscellaneous itemized deductions 
for any taxable year shall be allowed only to the extent that the 
aggregate of such deductions exceeds 2 percent of adjusted gross income.

(b) Miscellaneous itemized deductions

    For purposes of this section, the term ``miscellaneous itemized 
deductions'' means the itemized deductions other than--
        (1) the deduction under section 163 (relating to interest),
        (2) the deduction under section 164 (relating to taxes),
        (3) the deduction under section 165(a) for casualty or theft 
    losses described in paragraph (2) or (3) of section 165(c) or for 
    losses described in section 165(d),
        (4) the deductions under section 170 (relating to charitable, 
    etc., contributions and gifts) and section 642(c) (relating to 
    deduction for amounts paid or permanently set aside for a charitable 
    purpose),
        (5) the deduction under section 213 (relating to medical, 
    dental, etc., expenses),
        (6) any deduction allowable for impairment-related work 
    expenses,
        (7) the deduction under section 691(c) (relating to deduction 
    for estate tax in case of income in respect of the decedent),
        (8) any deduction allowable in connection with personal property 
    used in a short sale,
        (9) the deduction under section 1341 (relating to computation of 
    tax where taxpayer restores substantial amount held under claim of 
    right),
        (10) the deduction under section 72(b)(3) (relating to deduction 
    where annuity payments cease before investment recovered),
        (11) the deduction under section 171 (relating to deduction for 
    amortizable bond premium), and
        (12) the deduction under section 216 (relating to deductions in 
    connection with cooperative housing corporations).

(c) Disallowance of indirect deduction through pass-thru entity

                           (1) In general

        The Secretary shall prescribe regulations which prohibit the 
    indirect deduction through pass-thru entities of amounts which are 
    not allowable as a deduction if paid or incurred directly by an 
    individual and which contain such reporting requirements as may be 
    necessary to carry out the purposes of this subsection.

       (2) Treatment of publicly offered regulated investment 
                                  companies

        (A) In general

            Paragraph (1) shall not apply with respect to any publicly 
        offered regulated investment company.

        (B) Publicly offered regulated investment companies

            For purposes of this subsection--
            (i) In general

                The term ``publicly offered regulated investment 
            company'' means a regulated investment company the shares of 
            which are--
                    (I) continuously offered pursuant to a public 
                offering (within the meaning of section 4 of the 
                Securities Act of 1933, as amended (15 U.S.C. 77a to 
                77aa)),
                    (II) regularly traded on an established securities 
                market, or
                    (III) held by or for no fewer than 500 persons at 
                all times during the taxable year.
            (ii) Secretary may reduce 500 person requirement

                The Secretary may by regulation decrease the minimum 
            shareholder requirement of clause (i)(III) in the case of 
            regulated investment companies which experience a loss of 
            shareholders through net redemptions of their shares.

               (3) Treatment of certain other entities

        Paragraph (1) shall not apply--
            (A) with respect to cooperatives and real estate investment 
        trusts, and
            (B) except as provided in regulations, with respect to 
        estates and trusts.

(d) Impairment-related work expenses

    For purposes of this section, the term ``impairment-related work 
expenses'' means expenses--
        (1) of a handicapped individual (as defined in section 
    190(b)(3)) for attendant care services at the individual's place of 
    employment and other expenses in connection with such place of 
    employment which are necessary for such individual to be able to 
    work, and
        (2) with respect to which a deduction is allowable under section 
    162 (determined without regard to this section).

(e) Determination of adjusted gross income in case of estates and trusts

    For purposes of this section, the adjusted gross income of an estate 
or trust shall be computed in the same manner as in the case of an 
individual, except that--
        (1) the deductions for costs which are paid or incurred in 
    connection with the administration of the estate or trust and which 
    would not have been incurred if the property were not held in such 
    trust or estate, and
        (2) the deductions allowable under sections 642(b), 651, and 
    661,

shall be treated as allowable in arriving at adjusted gross income. 
Under regulations, appropriate adjustments shall be made in the 
application of part I of subchapter J of this chapter to take into 
account the provisions of this section.

(f) Coordination with other limitation

    This section shall be applied before the application of the dollar 
limitation of the second sentence of section 162(a) (relating to trade 
or business expenses).

(Added Pub. L. 99-514, title I, Sec. 132(a), Oct. 22, 1986, 100 Stat. 
2113; amended Pub. L. 100-647, title I, Sec. 1001(f), title IV, 
Sec. 4011(a), Nov. 10, 1988, 102 Stat. 3351, 3655; Pub. L. 101-239, 
title VII, Sec. 7814(f), Dec. 19, 1989, 103 Stat. 2414; Pub. L. 103-66, 
title XIII, Sec. 13213(c)(2), Aug. 10, 1993, 107 Stat. 474; Pub. L. 105-
277, div. J, title IV, Sec. 4004(b)(1), Oct. 21, 1998, 112 Stat. 2681-
910; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 319(2)], Dec. 21, 
2000, 114 Stat. 2763, 2763A-646.)

                       References in Text

    Section 4 of the Securities Act of 1933, referred to in subsec. 
(c)(2)(B)(i)(I), is classified to section 77d of Title 15, Commerce and 
Trade.


                               Amendments

    2000--Subsec. (f). Pub. L. 106-554 substituted ``the second 
sentence'' for ``the last sentence''.
    1998--Subsec. (b)(3). Pub. L. 105-277 substituted ``for casualty or 
theft losses described in paragraph (2) or (3) of section 165(c) or for 
losses described in section 165(d)'' for ``for losses described in 
subsection (c)(3) or (d) of section 165''.
    1993--Subsec. (b)(6) to (13). Pub. L. 103-66 redesignated pars. (7) 
to (13) as (6) to (12), respectively, and struck out former par. (6) 
which read as follows: ``the deduction under section 217 (relating to 
moving expenses),''.
    1989--Subsec. (c)(4). Pub. L. 101-239 struck out par. (4) which read 
as follows: ``Termination.--This subsection shall not apply to any 
taxable year beginning after December 31, 1989.''
    1988--Subsec. (b)(4). Pub. L. 100-647, Sec. 1001(f)(2), substituted 
``deductions'' for ``deduction'' and inserted before comma at end ``and 
section 642(c) (relating to deduction for amounts paid or permanently 
set aside for a charitable purpose)''.
    Subsec. (c). Pub. L. 100-647, Sec. 4011(a), amended subsec. (c) 
generally. Prior to amendment subsec. (c) read as follows: ``The 
Secretary shall prescribe regulations which prohibit the indirect 
deduction through pass-thru entities of amounts which are not allowable 
as a deduction if paid or incurred directly by an individual and which 
contain such reporting requirements as may be necessary to carry out the 
purposes of this subsection. The preceding sentence shall not apply--
        ``(1) with respect to cooperatives and real estate investment 
    trusts, and
        ``(2) except as provided in regulations, with respect to estates 
    and trusts.''
    Pub. L. 100-647, Sec. 1001(f)(4), amended last sentence generally. 
Prior to amendment, last sentence read as follows: ``The preceding 
sentence shall not apply with respect to estates, trusts, cooperatives, 
and real estate investment trusts.''
    Subsec. (e). Pub. L. 100-647, Sec. 1001(f)(3), amended subsec. (e) 
generally. Prior to amendment, subsec. (e) read as follows: ``For 
purposes of this section, the adjusted gross income of an estate or 
trust shall be computed in the same manner as in the case of an 
individual, except that the deductions for costs which are paid or 
incurred in connection with the administration of the estate or trust 
and would not have been incurred if the property were not held in such 
trust or estate shall be treated as allowable in arriving at adjusted 
gross income.''
    Subsec. (f). Pub. L. 100-647, Sec. 1001(f)(1), added subsec. (f).


                    Effective Date of 1998 Amendment

    Pub. L. 105-277, div. J, title IV, Sec. 4004(c)(2), Oct. 21, 1998, 
112 Stat. 2681-911, provided that: ``The amendment made by subsection 
(b)(1) [amending this section] shall apply to taxable years beginning 
after December 31, 1986.''


                    Effective Date of 1993 Amendment

    Amendment by Pub. L. 103-66 applicable to expenses incurred after 
Dec. 31, 1993, see section 13213(e) of Pub. L. 103-66 set out as a note 
under section 62 of this title.


                    Effective Date of 1989 Amendment

    Amendment by 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

    Amendment by section 1001(f) 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 4011(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, 1987.''


                             Effective Date

    Section applicable to taxable years beginning after Dec. 31, 1986, 
see section 151(a) of Pub. L. 99-514, set out as an Effective Date of 
1986 Amendment note under section 1 of this title.

    1-Year Delay in Treatment of Publicly Offered Regulated 
           Investment Companies Under 2-Percent Floor

    Pub. L. 100-203, title X, Sec. 10104(a), Dec. 22, 1987, 101 Stat. 
1330-386, provided that:
    ``(1) General rule.--Section 67(c) of the Internal Revenue Code of 
1986 to the extent it relates to indirect deductions through a publicly 
offered regulated investment company shall apply only to taxable years 
beginning after December 31, 1987.
    ``(2) Publicly offered regulated investment company defined.--For 
purposes of this subsection--
        ``(A) In general.--The term `publicly offered regulated 
    investment company' means a regulated investment company the shares 
    of which are--
            ``(i) continuously offered pursuant to a public offering 
        (within the meaning of section 4 of the Securities Act of 1933, 
        as amended (15 U.S.C. 77a to 77aa) [15 U.S.C. 77d]),
            ``(ii) regularly traded on an established securities market, 
        or
            ``(iii) held by or for no fewer than 500 persons at all 
        times during the taxable year.
        ``(B) Secretary may reduce 500 person requirement.--The 
    Secretary of the Treasury or his delegate may by regulation decrease 
    the minimum shareholder requirement of subparagraph (A)(iii) in the 
    case of regulated investment companies which experience a loss of 
    shareholders through net redemptions of their shares.''

                  Section Referred to in Other Sections

    This section is referred to in sections 56, 772, 773, 6654 of this 
title.
