26 U.S.C. § 4971 — Taxes on failure to meet minimum funding standards

(a) If an employer maintains a plan covered by section 412 during a taxable year^*, the initial tax is (1) for a single-employer plan, 10 percent of all unpaid minimum required contributions still unpaid at the end of any plan year ending in that taxable year, (2) for a multiemployer plan, 5 percent of the accumulated funding deficiency^* under section 431 at that time, or (3) for a CSEC plan, 10 percent of its CSEC accumulated funding deficiency at the end of the relevant plan year. (b) An additional tax applies if (1) a tax under subsection (a)(1) was imposed on an unpaid minimum required contribution and it remains unpaid at the close of the taxable period, (2) a tax under subsection (a)(2) was imposed on an accumulated funding deficiency and it is not corrected during the taxable period, or (3) a tax under subsection (a)(3) was imposed on a CSEC accumulated funding deficiency and it is not corrected during the taxable period. The additional tax is 100 percent of the applicable amount to the extent it was not paid or corrected. (c)(1) “Accumulated funding deficiency” has the meaning in section 431. (2) “Correct” means contributing to or under the plan enough to reduce the accumulated funding deficiency or CSEC accumulated funding deficiency, at the end of the plan year in which it arose, to zero. (3) “Taxable period” means the period beginning at the end of the plan year in which the relevant deficiency or unpaid contribution arose and ending on the earlier of (A) the date a deficiency notice for the subsection (a) tax is mailed or (B) the date that tax is assessed. (4)(A) “Unpaid minimum required contribution” means a section 430 minimum required contribution for a plan year that is not paid by its section 430(j)(1) due date. (B) A payment for any plan year is applied first, on a first-in, first-out basis, to unpaid minimum required contributions for all earlier plan years, and then to that year’s section 430 minimum required contribution. (5) “CSEC accumulated funding deficiency” means the accumulated funding deficiency determined under section 433. (d) Before mailing a deficiency notice for the tax under subsection (a) or (b), the Secretary^* must notify the Secretary of Labor and give the Secretary of Labor a reasonable opportunity, no longer than 60 days, (1) to require the responsible employer to eliminate the relevant deficiency or unpaid contribution, or (2) to comment on imposing the tax. (e)(1) Unless paragraph (2) applies, the employer responsible for contributing to or under the plan the amount described in section 412(a)(2) must pay the tax under subsection (a), (b), or (f). (2)(A) If that employer is a member of a controlled group, every group member is jointly and severally liable for the tax under subsection (a), (b), (f), or (g). (B) “Controlled group” means a group treated as one employer under section 414(b), (c), (m), or (o). (f)(1) For a plan covered by section 430(j)(4) or 433(f), the tax is 10 percent of the excess, if any, of (A) the quarterly liquidity shortfall over (B) the part paid by the required installment under section 430(j) or 433(f), if that installment was paid by its due date. (2) If the plan has a liquidity shortfall at the end of a quarter and at the end of each of the next four quarters, an additional tax equal to 100 percent of the amount taxed under paragraph (1) for that first quarter applies. (3)(A) “Liquidity shortfall” and “quarter” have the meanings given by section 430(j) or 433(f), as applicable. (B) If the paragraph (2) tax is paid for a quarter’s liquidity shortfall, no further tax under this subsection applies to that shortfall for that quarter. (4) The Secretary may waive all or part of this tax if the taxpayer^* shows that (A) the shortfall was caused by reasonable cause and not willful neglect and (B) reasonable steps were taken to fix it. (g)(1) Unless this subsection provides otherwise, no tax applies under this section for a taxable year to a multiemployer plan that was in critical status under section 432 for the plan years ending in or within that taxable year. Any tax imposed under this subsection for an endangered-status plan is in addition to other tax under this section. (2)(A) If a funding improvement or rehabilitation plan under section 432 requires an employer to contribute, a tax applies for each failure to make the required contribution on time. (B) The tax equals the required contribution that was not timely made. (C) The responsible employer pays it. (3) A seriously endangered plan that fails to meet the applicable benchmarks by the end of the funding improvement period, or a critical-status plan that fails to meet section 432(e) by the end of the rehabilitation period or is certified under section 432(b)(3)(A)(ii) for three consecutive plan years as not making scheduled progress, is treated as having an accumulated funding deficiency for the relevant period and each later plan year until compliance. The amount is the greater of the contributions needed to meet the benchmarks or requirements and the deficiency amount without this paragraph. (4)(A) A critical-status multiemployer plan owes a tax if it fails to adopt a rehabilitation plan within the time required by section 432. (B) For a plan sponsor and taxable year, the tax is the greater of (i) the subsection (a) tax without this subsection or (ii) $1,100 multiplied by the days after the 240-day period in section 432(e)(1)(A) ends until the rehabilitation plan is adopted. (C)(i) Each plan sponsor pays this tax. (ii) “Plan sponsor” has the meaning in section 432(j)(9). (5) The Secretary may waive some or all of the tax for a failure under paragraph (2) or (3) caused by reasonable cause and not willful neglect. Reasonable cause includes unanticipated and material market fluctuations, loss of a significant contributing employer, or other factors to the extent the tax would be excessive or otherwise inequitable compared with the failure. (6) Terms used in this subsection that are also used in section 432 have section 432’s meanings. (h)(1) A CSEC plan in funding-restoration status, as defined in section 433(j)(5)(A), owes a tax if it fails to adopt a funding-restoration plan within the time required by section 433(j)(3). (2) For a plan sponsor and taxable year, the tax is $100 multiplied by the days after the 180-day period in section 433(j)(3) ends until the plan adopts the funding-restoration plan. (3) The Secretary may waive some or all of the tax if the failure was caused by reasonable cause and not willful neglect. (4) The plan sponsor, as defined in section 433(j)(5)(E), pays the tax. (i) Section 275 addresses disallowing a deduction for taxes paid under this section. Section 413(b)(6) addresses liability when an employer is party to a collective bargaining agreement. Section 3002(b) of title III of the Employee^* Retirement Income Security Act of 1974 addresses notifying the Secretary of Labor about imposing tax under this section, waiving the tax under subsection (b), and other coordination between the Secretary of the Treasury^* and the Secretary of Labor concerning compliance with this section.