For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.

Section 41, referred to in subsecs. (b)(1)(A), (4), (g), (i)(1)(A), and (m), which related to employee stock ownership credit, was repealed by Pub. L. 99–514, title XI, § 1171(a), Oct. 22, 1986, 100 Stat. 2513. Section 30 of this title, relating to credit for increasing research activities, was renumbered section 41.

Section 12 of the Securities Exchange Act of 1934, referred to in subsec. (e)(4), is classified to section 78l of Title 15, Commerce and Trade.

Section 403(c)(1) of the Employee Retirement Income Security Act of 1974, referred to in subsecs. (j) and (k), is classified to section 1103(c)(1) of Title 29, Labor.

The enactment of the Tax Reform Act of 1984, referred to in subsecs. (g) and (k), means the enactment of div. A of Pub. L. 98–369, which was approved July 18, 1984.

Subsec. (n) of section 48, referred to in subsecs. (g) and (m), was repealed by section 474(o)(15) of Pub. L. 98–369.

A prior section 409, added Pub. L. 93–406, title II, § 2002(c), Sept. 2, 1974, 88 Stat. 964; amended Pub. L. 94–455, title XV, § 1501(b)(6), title XIX, §§ 1901(a)(60), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1736, 1774, 1834; Pub. L. 95–600, title I, §§ 156(c)(2), (3), 157(e)(1)(B), Nov. 6, 1978, 92 Stat. 2803, 2806; Pub. L. 96–222, title I, § 101(a)(14)(B), Apr. 1, 1980, 94 Stat. 204; Pub. L. 97–34, title III, § 311(g)(1)(D), (3), Aug. 13, 1981, 95 Stat. 281; Pub. L. 97–248, title II, § 243(b)(1)(B), title III, § 335(a)(2), Sept. 3, 1982, 96 Stat. 523, 628; Pub. L. 97–452, § 2(c)(1), Jan. 12, 1983, 96 Stat. 2478; Pub. L. 98–369, div. A, title I, § 42(a)(7), title V, § 522(d)(13), July 18, 1984, 98 Stat. 557, 871, related to retirement bonds, prior to repeal by Pub. L. 98–369, div. A, title IV, § 491(b), (f)(1), July 18, 1984, 98 Stat. 848, 853, applicable to obligations issued after Dec. 31, 1983.

2018—Subsec. (n)(1)(A)(i). Pub. L. 115–141 substituted “securities,” for “securities,,,”.

2014—Subsec. (q). Pub. L. 113–295 struck out subsec. (q) which related to cross-references.

2006—Subsec. (h)(7). Pub. L. 109–280 inserted “or subparagraph (B) or (C) of section 401(a)(35)” before period at end.

2002—Subsec. (o)(1)(C)(ii). Pub. L. 107–147 substituted “$800,000” for “$500,000” in two places and “$160,000” for “$100,000”.

2001—Subsecs. (p), (q). Pub. L. 107–16 added subsec. (p) and redesignated former subsec. (p) as (q).

1997—Subsec. (h)(2). Pub. L. 105–34 designated existing provisions as subpar. (A), inserted subpar. heading, struck out “In the case of an employer whose charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or to a trust described in section 401(a), a plan which otherwise meets the requirements of this subsection or section 4975(e)(7) shall not be considered to have failed to meet the requirements of this subsection or of section 401(a) merely because it does not permit a participant to exercise the right described in paragraph (1)(A) if such plan provides that participants entitled to a distribution from the plan shall have a right to receive such distribution in cash, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of paragraph (1)(B).” after “employer securities.”, and added subpar. (B).

1989—Subsec. (l)(5). Pub. L. 101–239, § 7811(h)(1), substituted “the second sentence” for “the last sentence”.

Subsec. (n)(1). Pub. L. 101–239, § 7304(a)(2)(A)(i), struck out “or section 2057” after “section 1042” in two places in introductory provisions.

Subsec. (n)(1)(A)(i). Pub. L. 101–239, § 7304(a)(2)(A)(ii), struck out “or any decedent if the executor of the estate of such decedent makes a qualified sale to which section 2057 applies” after “employer securities,”.

Subsec. (n)(1)(A)(ii). Pub. L. 101–239, § 7304(a)(2)(A)(iii), struck out “or the decedent” after “the taxpayer”.

Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 101–239, § 7304(a)(2)(B), struck out “or section 2057” after “section 1042”.

1988—Subsec. (d). Pub. L. 100–647, § 1011B(j)(3), inserted “or to any distribution or reinvestment required under section 401(a)(28)” after “under section 401(a)(9)”.

Subsec. (e)(5). Pub. L. 100–647, § 1018(t)(4)(H), substituted “paragraph (3)” for “paragraph (2) or (3)”.

Subsec. (h)(2). Pub. L. 100–647, § 1018(t)(4)(B), substituted “paragraph (1)(B)” for “section 409(o)”.

Subsec. (h)(7). Pub. L. 100–647, § 1011B(j)(5), added par. (7).

Subsec. (l)(4), (5). Pub. L. 100–647, § 1011B(k)(3), redesignated par. (4), relating to nonvoting common stock may be acquired in certain cases, as (5).

Subsec. (n)(1). Pub. L. 100–647, § 1011B(g)(1), made technical amendment to directory language of Pub. L. 99–514, § 1172(b)(1). See 1986 Amendment note below.

Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 100–647, § 1011B(g)(2), inserted “or section 2057” after “which section 1042”.

Subsec. (n)(3)(C). Pub. L. 100–647, § 1018(t)(4)(C), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “The term ‘nonallocation period’ means the 10-year period beginning on the later of—

“(i) the date of the sale of the qualified securities, or

“(ii) the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.”

Subsec. (o)(1)(A). Pub. L. 100–647, § 1011B(i)(3), substituted “if the participant and, if applicable pursuant to sections 401(a)(11) and 417, with the consent of the participant’s spouse elects” for “unless the participant otherwise elects”.

Subsec. (o)(1)(A)(ii). Pub. L. 100–647, § 1011B(i)(1), substituted “distribution is required to begin under this clause” for “such year”.

1986—Subsec. (a)(3). Pub. L. 99–514, § 1174(b)(2), inserted reference to subsec. (o).

Subsec. (d). Pub. L. 99–514, § 1899A(11), substituted “participant’s” for “participants’s”.

Pub. L. 99–514, § 1852(a)(4)(B), inserted at end “This subsection shall not apply to any distribution required under section 401(a)(9).”

Subsec. (d)(1). Pub. L. 99–514, § 1174(a)(1), substituted “separation from service, or termination of the plan” for “or separation from service”.

Subsec. (e)(2). Pub. L. 99–514, § 1854(f)(1)(C), (D), inserted “or beneficiary” after “participant” in two places and substituted “securities of the employer” for “employer securities”.

Subsec. (e)(3). Pub. L. 99–514, § 1854(f)(1)(B)–(D), inserted “or beneficiary” after “participant” in two places and substituted “securities of the employer” for “employer securities” and “any corporate matter which involves the voting of such shares with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary may prescribe in regulations” for “a corporate matter which (by law or charter) must be decided by more than a majority vote of outstanding common shares voted”.

Subsec. (e)(5). Pub. L. 99–514, § 1854(f)(1)(A), added par. (5).

Subsec. (h)(2). Pub. L. 99–514, § 1854(f)(3)(C), inserted “, except that such plan may distribute employer securities subject to a requirement that such securities may be resold to the employer under terms which meet the requirements of section 409(o)”.

Subsec. (h)(5), (6). Pub. L. 99–514, § 1174(c)(1)(A), added pars. (5) and (6).

Subsec. (l)(4). Pub. L. 99–514, § 1176(b), added par. (4) relating to acquisition of nonvoting common stock.

Subsec. (n). Pub. L. 99–514, § 1854(a)(3)(A), added subsec. (n). Former subsec. (n) redesignated (o).

Subsec. (n)(1). Pub. L. 99–514, § 1172(b)(1), as amended by Pub. L. 100–647, § 1011B(g)(1), inserted “or section 2057” in two places in introductory provisions, “or any decedent if the executor of the estate of such decedent makes a qualified sale to which section 2057 applies,” in subpar. (A)(i), and “or the decedent” in subpar. (A)(ii).

Subsec. (o). Pub. L. 99–514, § 1174(b)(1), added subsec. (o). Former subsec. (o) redesignated (p).

Pub. L. 99–514, § 1854(a)(3)(A), redesignated former subsec. (n) as (o).

Subsec. (p). Pub. L. 99–514, § 1174(b)(1), redesignated former subsec. (o) as (p).

1984—Subsec. (b)(1)(A). Pub. L. 98–369, § 474(r)(15)(A), (B), substituted “41” for “44G” and struck out “48(n)(1)(A) or” after “requirements of section”.

Subsec. (b)(4). Pub. L. 98–369, § 474(r)(15)(A), substituted “41” for “44G”.

Subsec. (g). Pub. L. 98–369, § 474(r)(15)(A), (C), substituted “41” for “44G” in two places, and inserted provision directing that, for purposes of the preceding sentence, the references to section 48(n)(1) and the employee plan credit shall refer to such section and credit as in effect before the enactment of the Tax Reform Act of 1984.

Subsec. (i)(1)(A). Pub. L. 98–369, § 474(r)(15)(A), (D), substituted “41” for “44G”, and struck out “48(n)(1) or” after “taxable year under section”.

Subsec. (k). Pub. L. 98–369, § 474(r)(15)(E), inserted provision requiring that, for purposes of this subsection, the reference to the matching employee plan credit refer to such credit as in effect before the enactment of the Tax Reform Act of 1984.

Subsec. (m). Pub. L. 98–369, § 474(r)(15)(A), substituted “41” for “44G”.

Subsec. (n)(3). Pub. L. 98–369, § 474(r)(15)(A), substituted “41” for “44G”.

1983—Subsec. (d)(2). Pub. L. 97–448, § 103(i), struck out provisions covering the sale of substantially all of the stock of a subsidiary of the employer.

Subsec. (h)(2). Pub. L. 97–448, § 103(h), substituted “the requirements of this subsection or of section 401(a)” for “the requirements of section 401(a)”.

1981—Subsec. (b). Pub. L. 97–34, § 331(c)(1)(A), (B), inserted in par. (1)(A) reference to section 44G(c)(1)(B), and inserted in par. (4) “or the credit allowed under section 44G (relating to the employee stock ownership credit)” after “basic employee plan credit”.

Subsec. (d). Pub. L. 97–34, § 337, designated provision relating to death, disability, or separation from service as par. (1) and added pars. (2) and (3).

Subsec. (g). Pub. L. 97–34, § 331(c)(1)(C), (D), inserted reference to section 44G(c)(1)(B) and inserted “or the credit allowed under section 44G (relating to employee stock ownership credit)” after “employee plan credit”.

Subsec. (h)(2). Pub. L. 97–34, § 334, substituted “this subsection” for “this section” and inserted provision respecting receipt of distributions in cash where employer’s charter or bylaws restrict ownership of substantially all outstanding employer securities to employees or to a section 401(a) trust where a participant is not permitted to exercise the right described in par. (1)(A).

Subsec. (h)(3), (4). Pub. L. 97–34, § 336, added pars. (3) and (4).

Subsec. (i)(1)(A). Pub. L. 97–34, § 331(c)(1)(E), inserted reference to section 44G(c)(1)(B).

Subsec. (m). Pub. L. 97–34, § 331(c)(1)(F), inserted reference to section 44G(c)(1)(B).

Subsec. (n)(2), (3). Pub. L. 97–34, § 331(c)(1)(G), (H), inserted “or employee stock ownership credit” after “employee plan credit” in par. (2) and added par. (3).

1980—Pub. L. 96–222, § 101(a)(7)(L)(v)(VII), substituted “tax credit employee stock ownership plans” for “ESOPS” in section catchline.

Subsec. (a). Pub. L. 96–222, § 101(a)(7)(L)(ii)(I), (v)(VI), substituted in heading and in text “tax credit employee stock ownership plan” for “ESOP”.

Subsec. (b)(4). Pub. L. 96–222, § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”.

Subsec. (d). Pub. L. 96–222, § 101(a)(7)(F), inserted “(or allocated to a participant’s account in connection with matched employer and employee contributions)” after “under subsection (b)”.

Subsec. (f)(1). Pub. L. 96–222, § 101(a)(7)(I)(i), substituted “only if it is established on or before the due date (including any extension of such date) for the filing of the employer’s tax return for the first taxable year of the employer for which an employee plan credit is claimed by the employer with respect to the plan” for “for a plan year only if it is established on or before the due date for the filing of the employer’s tax return for the taxable year (including any extension of such date) in which or with which the plan year ends”.

Subsec. (f)(2). Pub. L. 96–222, § 101(a)(7)(I)(ii), (L)(v)(VII), substituted “employee plan” for “ESOP” and inserted “with respect to the plan” after “by the employer”.

Subsec. (g). Pub. L. 96–222, § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”.

Subsec. (h)(2). Pub. L. 96–222, § 101(a)(7)(E), inserted “or of section 4975(e)(7)” after “the requirements of this section”.

Subsecs. (j)(2), (k)(1). Pub. L. 96–222, § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit”.

Subsec. (l)(2)(B). Pub. L. 96–222, § 101(a)(7)(J)(i), substituted “class of common stock” for “class of stock”.

Subsec. (l)(3). Pub. L. 96–222, § 101(a)(7)(J)(ii), (L)(ii)(II), substituted “as employer securities” for “as meeting the requirements of paragraph (1)”, “paragraph (1) or (2)” for “paragraph (2)”, and “tax credit employee stock ownership plan” for “ESOP” and inserted provisions requiring preferred stock to be treated as noncallable if after the call there will be a reasonable opportunity for a conversion which meets the requirements of the preceding sentence.

Subsec. (l)(4). Pub. L. 96–605 substituted in heading “Application to controlled group of corporations” for “Controlled group of corporations defined” and in subpar. (B) heading “Where common parent owns at least” for “Common parent may own only” and added subpar. (C).

Subsec. (m). Pub. L. 96–222, § 101(a)(7)(D), (L)(i), substituted provisions relating to nonrecognition of gain or loss on contribution of employer securities to a tax credit employee stock ownership plan for provisions relating to contributions of stock of a controlling corporation.

Subsec. (n). Pub. L. 96–222, § 101(a)(7)(L)(iii)(V), substituted “employee plan credit” for “ESOP credit” in pars. (1) and (2).

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Amendment by Pub. L. 109–280 applicable to plan years beginning after Dec. 31, 2006, with special rules for collectively bargained agreements and certain employer securities held in an ESOP, see section 901(c) of Pub. L. 109–280, set out as a note under section 401 of this title.

Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title.

Pub. L. 107–16, title VI, § 656(d), June 7, 2001, 115 Stat. 135, provided that:

Pub. L. 105–34, title I, § 1506(c), Aug. 5, 1997, 111 Stat. 1066, provided that: “The amendments made by this section [amending this section, section 4975 of this title, and section 1108 of Title 29, Labor] shall apply to taxable years beginning after December 31, 1997.”

Pub. L. 101–239, title VII, § 7304(a)(3), Dec. 19, 1989, 103 Stat. 2353, provided that: “The amendments made by this subsection [amending this section and sections 4978 and 4979A of this title and repealing sections 2057 and 4978A of this title] shall apply to the estates of decedents dying after the date of the enactment of this Act [Dec. 19, 1989].”

Amendment by section 7811(h)(1) 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.

Amendment by 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.

Pub. L. 99–514, title XI, § 1172(c), Oct. 22, 1986, 100 Stat. 2515, provided that: “The amendments made by this section [enacting section 2057 of this title and amending this section and section 4979A of this title] shall apply to sales after the date of the enactment of this Act [Oct. 22, 1986] with respect to which an election is made by the executor of an estate who is required to file the return of the tax imposed by the Internal Revenue Code of 1986 on a date (including extensions) after the date of the enactment of this Act.”

Pub. L. 99–514, title XI, § 1174(a)(2), Oct. 22, 1986, 100 Stat. 2516, as amended by Pub. L. 100–647, title I, § 1011B(i)(2), Nov. 10, 1988, 102 Stat. 3492, provided that: “The amendment made by this subsection [amending this section] shall apply to distributions after December 31, 1984.”

Pub. L. 99–514, title XI, § 1174(b)(3), Oct. 22, 1986, 100 Stat. 2517, provided that: “The amendments made by this subsection [amending this section] shall apply to distributions attributable to stock acquired after December 31, 1986.”

Pub. L. 99–514, title XI, § 1174(c)(1)(B), Oct. 22, 1986, 100 Stat. 2518, provided that: “The amendment made by this paragraph [amending this section] shall apply to distributions attributable to stock acquired after December 31, 1986, except that a plan may elect to have such amendment apply to all distributions after the date of the enactment of this Act [Oct. 22, 1986].”

Amendment by section 1176(b) of Pub. L. 99–514 applicable to acquisitions of securities after Dec. 31, 1986, see section 1176(c) of Pub. L. 99–514, set out as a note under section 401 of this title.

Amendment by section 1852(a)(4)(B) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Pub. L. 99–514, title XVIII, § 1854(a)(3)(C), Oct. 22, 1986, 100 Stat. 2874, as amended by Pub. L. 100–647, title I, § 1018(t)(4)(G), Nov. 10, 1988, 102 Stat. 3588, provided that:

Pub. L. 99–514, title XVIII, § 1854(f)(4)(A), (B), Oct. 22, 1986, 100 Stat. 2882, provided that:

“(B) The amendments made by subparagraphs (B), (C), and (D) of paragraph (1) [amending this section] shall apply after December 31, 1986, to stock acquired after December 31, 1979.”

Amendment by section 474(r)(15) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.

Redesignation of section 409A as 409 by section 491(e)(1) of Pub. L. 98–369 effective Jan. 1, 1984, see section 491(f)(3) of Pub. L. 98–369, set out as a note under section 401 of this title.

Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Amendment by section 331(c)(1) of Pub. L. 97–34 applicable to taxable years ending after Dec. 31, 1982, see section 331(f)(2) of Pub. L. 97–34, set out as a note under section 404 of this title.

Pub. L. 97–34, title III, § 337(b), Aug. 13, 1981, 95 Stat. 298, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [amending this section] shall apply to distributions described in section 409A(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (or any corresponding provision of prior law) made after March 29, 1975.”

Amendment by sections 334 and 336 of Pub. L. 97–34 applicable to taxable years beginning after Dec. 31, 1981, see section 339 of Pub. L. 97–34, set out as a note under section 401 of this title.

Pub. L. 96–605, title II, § 224(b), Dec. 28, 1980, 94 Stat. 3529, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to qualified investment for taxable years beginning after December 31, 1978.”

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Pub. L. 95–600, title I, § 141(g), Nov. 6, 1978, 92 Stat. 2795, as added by Pub. L. 96–222, title I, § 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.