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26 U.S.C. § 26 — Limitation based on tax liability; definition of tax liability

submitted 42 years ago by Pub. L. 98-369 to r/title-26-INTERNAL-REVENUE-CODE · 513 words · no verdicts yet

in plain englishAI-generated · not legal advice

The total of all tax credits under this part of the law can't be more than your regular income tax plus your alternative minimum tax, after subtracting the foreign tax credit. 'Regular tax liability' means your normal income tax, but it leaves out many special taxes — like the alternative minimum tax and various penalty or recapture taxes — which this section lists one by one.

(a) Limitation based on amount of tax: The total credits allowed under this part of the law for the year cannot be more than the sum of: (1) your regular tax liability for the year, minus the foreign tax credit allowed under section 27; plus (2) the alternative minimum tax imposed by section 55(a) for the year. (b) Regular tax liability: (1) In general, "regular tax liability" means the income tax this chapter imposes for the taxable year. (2) Exception for certain taxes: even though the following taxes are technically imposed by this chapter, they are not counted as part of "regular tax liability." Each is a specific penalty, recapture, or special tax defined elsewhere in the tax code: (A) the alternative minimum tax; (B) the base erosion and anti-abuse tax; (C) extra taxes on certain retirement-account distributions; (D) recapture of mortgage bond or mortgage credit certificate subsidies; (E) extra tax on certain Coverdell education savings account distributions; (F) the accumulated earnings tax; (G) the personal holding company tax; (H) tax on recovered foreign expropriation losses; (I) tax on certain built-in gains of S corporations; (J) tax when an S corporation's passive income is too high relative to its receipts; (K) tax on nonqualified withdrawals from capital construction funds; (L) certain taxes on income of nonresident aliens and foreign corporations; (M) taxes on certain residual interests in mortgage pools; (N) the branch profits tax on foreign corporations; (O) interest on certain deferred tax liabilities from installment sales; (P) [repealed]; (Q) extra tax on Archer MSA distributions not used for qualified medical expenses; (R) a penalty for Medicare Advantage MSA distributions not used for qualified medical expenses if the required minimum balance isn't kept; (S) taxes for certain failures to maintain high-deductible health plan coverage; (T) recapture of certain deductions for fractional charitable gifts; (U) extra tax on health savings account distributions not used for qualified medical expenses; (V) interest and additional tax on certain deferred compensation under section 409A; (W) recapture of the homebuyer credit; (X) tax related to the determinability of deferred compensation amounts under section 457A; (Y) extra tax on ABLE account distributions not used for qualified disability expenses; and (Z) tax on excess advance child tax credit payments. (c) Tentative minimum tax: For this part of the law, "tentative minimum tax" means the amount figured under section 55(b)(1).
the actual law source: uscode.house.gov ↗public domain
(a) Limitation based on amount of tax

The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—

(1)

the taxpayer’s regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and

(2)

the tax imposed by section 55(a) for the taxable year.

(b) Regular tax liability

For purposes of this part—

(1) In general

The term “regular tax liability” means the tax imposed by this chapter for the taxable year.

(2) Exception for certain taxes

For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:

(A)

section 55 (relating to minimum tax),

(B)

section 59A (relating to base erosion and anti-abuse tax),

(C)

subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),

(D)

section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),

(E)

section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),

(F)

section 531 (relating to accumulated earnings tax),

(G)

section 541 (relating to personal holding company tax),

(H)

section 1351(d)(1) (relating to recoveries of foreign expropriation losses),

(I)

section 1374 (relating to tax on certain built-in gains of S corporations),

(J)

section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),

(K)

subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),

(L)

sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),

(M)

section 860E(e) (relating to taxes with respect to certain residual interests),

(N)

section 884 (relating to branch profits tax),

(O)

sections 453(l)(3) and 453A(c) (relating to interest on certain deferred tax liabilities),

[(P)

Repealed. Pub. L. 115–141, div. U, title IV, § 401(b)(2), Mar. 23, 2018, 132 Stat. 1201.]

(Q)

section 220(f)(4) (relating to additional tax on Archer MSA distributions not used for qualified medical expenses),

(R)

section 138(c)(2) (relating to penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained),

(S)

sections 106(e)(3)(A)(ii), 223(b)(8)(B)(i)(II), and 408(d)(9)(D)(i)(II) (relating to certain failures to maintain high deductible health plan coverage),

(T)

section 170(o)(3)(B) (relating to recapture of certain deductions for fractional gifts),

(U)

section 223(f)(4) (relating to additional tax on health savings account distributions not used for qualified medical expenses),

(V)

subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A (relating to interest and additional tax with respect to certain deferred compensation),

(W)

section 36(f) (relating to recapture of homebuyer credit),

(X)

section 457A(c)(1)(B) (relating to determinability of amounts of compensation),

(Y)

section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses), and

(Z)

section 24(j)(2) (relating to excess advance payments).

(c) Tentative minimum tax

For purposes of this part, the term “tentative minimum tax” means the amount determined under section 55(b)(1).

Source credit: (Added § 25, renumbered § 26, Pub. L. 98–369, div. A, title IV, § 472, title VI, § 612(a), July 18, 1984, 98 Stat. 827, 905; amended Pub. L. 99–499, title V, § 516(b)(1)(A), Oct. 17, 1986, 100 Stat. 1770; Pub. L. 99–514, title II, § 261(c), title VI, § 632(c)(1), title VII, § 701(c)(1), Oct. 22, 1986, 100 Stat. 2214, 2277, 2340; Pub. L. 100–647, title I, §§ 1006(t)(16)(C), 1007(g)(1), 1011A(c)(10), 1012(q)(8), title IV, § 4005(g)(4), title V, § 5012(b)(2), Nov. 10, 1988, 102 Stat. 3425, 3434, 3476, 3524, 3650, 3662; Pub. L. 101–239, title VII, §§ 7811(c)(1), (2), 7821(a)(4)(A), Dec. 19, 1989, 103 Stat. 2406, 2407, 2424; Pub. L. 104–188, title I, § 1621(b)(1), Aug. 20, 1996, 110 Stat. 1866; Pub. L. 105–34, title II, § 213(e)(1), title XVI, § 1602(a)(1), Aug. 5, 1997, 111 Stat. 817, 1093; Pub. L. 105–277, div. J, title II, § 2001(a), Oct. 21, 1998, 112 Stat. 2681–901; Pub. L. 106–170, title V, § 501(a), Dec. 17, 1999, 113 Stat. 1918; Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–628; Pub. L. 107–16, title II, §§ 201(b)(2)(D), 202(f)(2)(C), title VI, § 618(b)(2)(C), June 7, 2001, 115 Stat. 46, 49, 108; Pub. L. 107–22, § 1(b)(2)(A), July 26, 2001, 115 Stat. 197; Pub. L. 107–147, title IV, §§ 415(a), 417(23)(B), title VI, § 601(a), Mar. 9, 2002, 116 Stat. 54, 57, 59; Pub. L. 108–311, title III, § 312(a), title IV, §§ 401(a)(1), 408(a)(5)(A), Oct. 4, 2004, 118 Stat. 1181, 1183, 1191; Pub. L. 109–135, title IV, §§ 403(hh)(1), 412(c), Dec. 21, 2005, 119 Stat. 2631, 2636; Pub. L. 109–222, title III, § 302(a), May 17, 2006, 120 Stat. 353; Pub. L. 110–166, § 3(a), Dec. 26, 2007, 121 Stat. 2461; Pub. L. 110–172, § 11(a)(3), Dec. 29, 2007, 121 Stat. 2484; Pub. L. 110–289, div. C, title I, § 3011(b)(1), July 30, 2008, 122 Stat. 2891; Pub. L. 110–343, div. B, title I, § 106(e)(2)(D), title II, § 205(d)(1)(D), div. C, title I, § 101(a), title VIII, § 801(b), Oct. 3, 2008, 122 Stat. 3817, 3839, 3863, 3931; Pub. L. 111–5, div. B, title I, §§ 1004(b)(3), 1011(a), 1142(b)(1)(D), 1144(b)(1)(D), Feb. 17, 2009, 123 Stat. 314, 319, 330, 332; Pub. L. 111–148, title X, § 10909(b)(2)(E), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, § 101(b)(1), title II, § 202(a), Dec. 17, 2010, 124 Stat. 3298, 3299; Pub. L. 112–240, title I, § 104(c)(1), Jan. 2, 2013, 126 Stat. 2321; Pub. L. 113–295, div. A, title II, § 221(a)(12)(B), div. B, title I, § 102(e)(1), Dec. 19, 2014, 128 Stat. 4038, 4062; Pub. L. 115–97, title I, § 14401(c), Dec. 22, 2017, 131 Stat. 2233; Pub. L. 115–141, div. U, title IV, § 401(b)(2), (d)(1)(D)(ii), Mar. 23, 2018, 132 Stat. 1201, 1206; Pub. L. 117–2, title IX, § 9611(b)(4)(A), Mar. 11, 2021, 135 Stat. 150.)

history & why it existsrecord from the source credit
  • 1984Enacted · Pub. L. 98-369 · 98 Stat. 827, 905
  • 1986Amended · Pub. L. 99-499 · 100 Stat. 1770
  • 1986Amended · Pub. L. 99-514 · 100 Stat. 2214, 2277, 2340
  • 1988Amended · Pub. L. 100-647 · 102 Stat. 3425, 3434, 3476, 3524, 3650, 3662
  • 1989Amended · Pub. L. 101-239 · 103 Stat. 2406, 2407, 2424
  • 1996Amended · Pub. L. 104-188 · 110 Stat. 1866
  • 1997Amended · Pub. L. 105-34 · 111 Stat. 817, 1093
  • 1998Amended · Pub. L. 105-277 · 112 Stat. 2681
  • 1999Amended · Pub. L. 106-170 · 113 Stat. 1918
  • 2000Amended · Pub. L. 106-554 · 114 Stat. 2763, 2763
  • 2001Amended · Pub. L. 107-16 · 115 Stat. 46, 49, 108
  • 2001Amended · Pub. L. 107-22 · 115 Stat. 197
  • 2002Amended · Pub. L. 107-147 · 116 Stat. 54, 57, 59
  • 2004Amended · Pub. L. 108-311 · 118 Stat. 1181, 1183, 1191
  • 2005Amended · Pub. L. 109-135 · 119 Stat. 2631, 2636
  • 2006Amended · Pub. L. 109-222 · 120 Stat. 353
  • 2007Amended · Pub. L. 110-166 · 121 Stat. 2461
  • 2007Amended · Pub. L. 110-172 · 121 Stat. 2484
  • 2008Amended · Pub. L. 110-289 · 122 Stat. 2891
  • 2008Amended · Pub. L. 110-343 · 122 Stat. 3817, 3839, 3863, 3931
  • 2009Amended · Pub. L. 111-5 · 123 Stat. 314, 319, 330, 332
  • 2010Amended · Pub. L. 111-148 · 124 Stat. 1023
  • 2010Amended · Pub. L. 111-312 · 124 Stat. 3298, 3299
  • 2013Amended · Pub. L. 112-240 · 126 Stat. 2321
  • 2014Amended · Pub. L. 113-295 · 128 Stat. 4038, 4062
  • 2017Amended · Pub. L. 115-97 · 131 Stat. 2233
  • 2018Amended · Pub. L. 115-141 · 132 Stat. 1201, 1206
  • 2021Amended · Pub. L. 117-2 · 135 Stat. 150

A history note hasn’t been published yet. The record shows enactment by Pub. L. 98-369 on 1984-07-18.

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