§ 4972

§ 4972. Tax on nondeductible contributions to qualified employer plans

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(a)
Tax imposed

In the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer).

(b)
Employer liable for tax

The tax imposed by this section shall be paid by the employer making the contributions.

(c)
Nondeductible contributions

For purposes of this section”

(1)
In general

The term “nondeductible contributions” means, with respect to any qualified employer plan, the sum of”

(A)
the excess (if any) of”


(i)
the amount contributed for the taxable year by the employer to or under such plan, over


(ii)
the amount allowable as a deduction under section
404 for such contributions (determined without regard to subsection (e) thereof), and


(B)
the amount determined under this subsection for the preceding taxable year reduced by the sum of”


(i)
the portion of the amount so determined returned to the employer during the taxable year, and


(ii)
the portion of the amount so determined deductible under section
404 for the taxable year (determined without regard to subsection (e) thereof).


(2)
Ordering rule for section
404

For purposes of paragraph (1), the amount allowable as a deduction under section
404 for any taxable year shall be treated as”

(A)
first from carryforwards to such taxable year from preceding taxable years (in order of time), and


(B)
then from contributions made during such taxable year.


(3)
Contributions which may be returned to employer

In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account any contribution for such taxable year which is distributed to the employer in a distribution described in section
4980
(c)(2)(B)(ii) if such distribution is made on or before the last day on which a contribution may be made for such taxable year under section
404
(a)(6).

(4)
Special rule for self-employed individuals

For purposes of paragraph (1), if”

(A)
the amount which is required to be contributed to a plan under section
412 on behalf of an individual who is an employee (within the meaning of section
401
(c)(1)), exceeds


(B)
the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established,

such excess shall be treated as an amount allowable as a deduction under section
404.

(5)
Pre-1987 contributions

The term “nondeductible contribution” shall not include any contribution made for a taxable year beginning before January 1, 1987.

(6)
Exceptions

In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account”

(A)
so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section
404
(a)(7) as does not exceed the amount of contributions described in section
401
(m)(4)(A), or


(B)
so much of the contributions to a simple retirement account (within the meaning of section
408
(p)) or a simple plan (within the meaning of section
401
(k)(11)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer.

For purposes of subparagraph (A), the deductible limits under section
404
(a)(7) shall first be applied to amounts contributed to a defined benefit plan and then to amounts described in subparagraph (A). Subparagraph (B) shall not apply to contributions made on behalf of the employer or a member of the employer™s family (as defined in section
447
(e)(1)).

(7)
Defined benefit plan exception

In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section
431
(c)(6)). For purposes of this paragraph, the deductible limits under section
404
(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year.

(d)
Definitions

For purposes of this section”

(1)
Qualified employer plan


(A)
In general

The term “qualified employer plan” means”

(i)
any plan meeting the requirements of section
401
(a) which includes a trust exempt from tax under section
501
(a),


(ii)
an annuity plan described in section
403
(a),


(iii)
any simplified employee pension (within the meaning of section
408
(k)), and


(iv)
any simple retirement account (within the meaning of section
408
(p)).


(B)
Exemption for governmental and tax exempt plans

The term “qualified employer plan” does not include a plan described in subparagraph (A) or (B) of section
4980
(c)(1).

(2)
Employer

In the case of a plan which provides contributions or benefits for employees some or all of whom are self-employed individuals within the meaning of section
401
(c)(1), the term “employer” means the person treated as the employer under section
401
(c)(4).

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