Internal Revenue Code:Sec. 67. 2-percent floor on miscellaneous itemized deductions
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Contents |
Location in Internal Revenue Code
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.
Statute
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).
Sources
(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
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.
Miscellaneous
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.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 642, 772, 773, 6654
of this title.
