26 U.S.C. § 860E
The taxable income of any holder of a residual interest in a REMIC for any taxable year shall in no event be less than the excess inclusion for such taxable year.
All members of an affiliated group filing a consolidated return shall be treated as 1 taxpayer for purposes of this subsection.
Any excess inclusion for any taxable year shall not be taken into account-
For purposes of part VI of subchapter A of this chapter-
If the holder of any residual interest in a REMIC is an organization subject to the tax imposed by section 511, the excess inclusion of such holder for any taxable year shall be treated as unrelated business taxable income of such holder for purposes of section 511.
For purposes of this section-
The term "excess inclusion" means, with respect to any residual interest in a REMIC for any calendar quarter, the excess (if any) of-
To the extent provided in regulations, if residual interests in a REMIC do not have significant value, the excess inclusions with respect to such interests shall be the amount determined under subparagraph (A) without regard to subparagraph (B).
For purposes of this subsection, the daily accrual with respect to any residual interest for any day in any calendar quarter shall be determined by allocating to each day in such quarter its ratable portion of the product of-
For purposes of this paragraph, the adjusted issue price of any residual interest at the beginning of any calendar quarter is the issue price of the residual interest (adjusted for contributions)-
For purposes of this paragraph, the term "Federal long-term rate" means the Federal long-term rate which would have applied to the residual interest under section 1274(d) (determined without regard to paragraph (2) thereof) if it were a debt instrument.
If a residual interest in a REMIC is held by a real estate investment trust, under regulations prescribed by the Secretary-
shall be allocated among the shareholders of such trust in proportion to the dividends received by such shareholders from such trust, and
Rules similar to the rules of the preceding sentence shall apply also in the case of regulated investment companies, common trust funds, and organizations to which part I of subchapter T applies.
A tax is hereby imposed on any transfer of a residual interest in a REMIC to a disqualified organization.
The amount of the tax imposed by paragraph (1) on any transfer of a residual interest shall be equal to the product of-
The tax imposed by paragraph (1) on any transfer shall be paid by the transferor; except that, where such transfer is through an agent for a disqualified organization, such tax shall be paid by such agent.
The person (otherwise liable for any tax imposed by paragraph (1)) shall be relieved of liability for the tax imposed by paragraph (1) with respect to any transfer if-
For purposes of this section, the term "disqualified organization" means-
For purposes of subparagraph (A), the rules of section 168(h)(2)(D) (relating to treatment of certain taxable instrumentalities) shall apply; except that, in the case of the Federal Home Loan Mortgage Corporation, clause (ii) of such section shall not apply.
If, at any time during any taxable year of a pass-thru entity, a disqualified organization is the record holder of an interest in such entity, there is hereby imposed on such entity for such taxable year a tax equal to the product of-
For purposes of this paragraph, the term "pass-thru entity" means-
Except as provided in regulations, a person holding an interest in a pass-thru entity as a nominee for another person shall, with respect to such interest, be treated as a pass-thru entity.
Any tax imposed by this paragraph with respect to any excess inclusion of any pass-thru entity for any taxable year shall, for purposes of this title (other than this subsection), be applied against (and operate to reduce) the amount included in gross income with respect to the residual interest involved.
No tax shall be imposed by subparagraph (A) with respect to any interest in a pass-thru entity for any period if-
The Secretary may waive the tax imposed by paragraph (1) on any transfer if-
For purposes of subtitle F, the taxes imposed by this subsection shall be treated as excise taxes with respect to which the deficiency procedures of such subtitle apply.
Except as provided in regulations, with respect to any variable contract (as defined in section 817), there shall be no adjustment in the reserve to the extent of any excess inclusion.
26 U.S.C. § 860E
EDITORIAL NOTES
AMENDMENTS2022-Subsec. (a)(4)(A). Pub. L. 117-169 substituted "55(b)(1)(D)" for "55(b)(2)".2020-Subsec. (a)(3)(B). Pub. L. 116-136 substituted "subsection (a)(2)(B)(ii)(I) and the second sentence of subsection (b)(2) of section 172." for "the 2nd sentence of section 172(b)(2)."2017-Subsec. (e)(2)(B), (6)(A)(ii). Pub. L. 115-97 substituted "section 11(b)" for "section 11(b)(1)".1996-Subsec. (a)(1). Pub. L. 104-188, §1616(b) (10)(A), substituted "The" for "Except as provided in paragraph (2), the".Subsec. (a)(2). Pub. L. 104-188, §1616(b) (10)(B), (C), redesignated par. (3) as (2), struck out ", except that paragraph (2) shall be applied separately with respect to each corporation which is a member of such group and to which section 593 applies" after "of this subsection", and struck out former par. (2) which read as follows: "EXCEPTION FOR CERTAIN FINANCIAL INSTITUTIONS.-Paragraph (1) shall not apply to any organization to which section 593 applies. The Secretary may by regulations provide that the preceding sentence shall not apply where necessary or appropriate to prevent avoidance of tax imposed by this chapter." Subsec. (a)(3). Pub. L. 104-188, §1616(b) (10)(B), redesignated par. (5) as (3). Former par. (3) redesignated (2).Subsec. (a)(4). Pub. L. 104-188, §1616(b) (10)(B), (D), redesignated par. (6) as (4), struck out at end "The preceding sentence shall not apply to any organization to which section 593 applies, except to the extent provided in regulations prescribed by the Secretary under paragraph (2).", and struck out former par. (4) which related to certain subsidiaries being treated as single corporations to which section 593 applied.Subsec. (a)(5). Pub. L. 104-188, §1616(b) (10)(B), redesignated par. (5) as (3). Subsec. (a)(6). Pub. L. 104-188, §1616(b) (10)(B), redesignated par. (6) as (4). Pub. L. 104-188, §1704(h)(1), added par. (6).1988-Subsec. (a)(3), (4). Pub. L. 100-647, §1006(t)(15), added pars. (3) and (4).Subsec. (a)(5). Pub. L. 100-647, §1006(t)(27), added par. (5). Subsec. (c)(2)(B). Pub. L. 100-647, §1006(t)(13), (17), substituted "issue price of the residual interest (adjusted for contributions)" for "issue price of residual interest" in introductory text, and in cl. (ii) inserted "(but not below zero)" after "decreased".Subsec. (d). Pub. L. 100-647, §1006(t)(23), inserted at end "Rules similar to the rules of the preceding sentence shall apply also in the case of regulated investment companies, common trust funds, and organizations to which part I of subchapter T applies."Subsec. (e). Pub. L. 100-647, §1006(t)(16)(B), added subsec. (e).Subsec. (f). Pub. L. 100-647, §1006(t)(26), added subsec. (f).
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2022 AMENDMENT Amendment by Pub. L. 117-169 applicable to taxable years beginning after Dec. 31, 2022, see section 10101(f) of Pub. L. 117-169, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 2020 AMENDMENT Amendment by Pub. L. 116-136 applicable to taxable years beginning after Dec. 31, 2017, and to taxable years beginning on or before Dec. 31, 2017, to which net operating losses arising in taxable years beginning after Dec. 31, 2017, are carried, see section 2303(d)(1) of Pub. L. 116-136, set out in a note under section 172 of this title.
EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115-97 applicable to taxable years beginning after Dec. 31, 2017, see section 13001(c)(1) of Pub. L. 115-97, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 1616(b)(10) of Pub. L. 104-188 applicable to taxable years beginning after Dec. 31, 1995, but not applicable to any residual interest held by a taxpayer if such interest has been held by such taxpayer at all times since Oct. 31, 1995, see section 1616(c)(1), (4) of Pub. L. 104-188, set out as a note under section 593 of this title. Pub. L. 104-188, §1704(h)(2), Aug. 20, 1996, 110 Stat. 1881, provided that: "The amendment made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 671 of the Tax Reform Act of 1986 [Pub. L. 99-514] unless the taxpayer elects to apply such amendment only to taxable years beginning after the date of the enactment of this Act [Aug. 20, 1996]."
EFFECTIVE DATE OF 1988 AMENDMENT Pub. L. 100-647, title I, §1006(t)(16)(D)(ii)-(iv), Nov. 10, 1988, 102 Stat. 3425, provided that:"(ii) The amendments made by subparagraphs (B) and (C) [amending this section and section 26 of this title] (except to the extent they relate to paragraph (6) of section 860E(e) of the 1986 Code as added by such amendments) shall apply to transfers after March 31, 1988; except that such amendments shall not apply to any transfer pursuant to a binding written contract in effect on such date."(iii) Except as provided in clause (iv), the amendments made by subparagraphs (B) and (C) (to the extent they relate to paragraph (6) of section 860E(e) of the 1986 Code as so added) shall apply to excess inclusions for periods after March 31, 1988 but only to the extent such inclusions are-"(I) allocable to an interest in a pass-thru entity acquired after March 31, 1988, or"(II) allocable to an interest in a pass-thru entity acquired on or before March 31, 1988, but attributable to a residual interest acquired by the pass-thru entity after March 31, 1988.For purposes of the preceding sentence, any interest in a pass-thru entity (or residual interest) acquired after March 31, 1988, pursuant to a binding written contract in effect on such date shall be treated as acquired before such date."(iv) In the case of any real estate investment trust, regulated investment company, common trust fund, or publicly traded partnership, no tax shall be imposed under section 860E(e)(6) of the 1986 Code (as added by the amendment made by subparagraph (B)) for any taxable year beginning before January 1, 1989."Amendment by section 1006(t)(13), (15), (17), (23), (26), (27) 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.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- State
- The term "State" shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- international organization
- The term "international organization" means a public international organization entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f).
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- shareholder
- The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.