r/title-26-INTERNAL-REVENUE-CODE wiki — defined terms

“qualified veterans’ mortgage bond” applies throughout its part

the term “qualified veterans’ mortgage bond” means any bond— (1) which is issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide residences for veterans, (2) the payment of the principal and interest on which is secured by the general obligation of a State, (3) which is part of an issue which meets the requirements of subsections (c), (g), (i)(1), and ( l ), and (4) which is part of an issue which does not meet the private business tests of paragraphs (1) and (2) of section 141(b). Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(2) shall apply to the requirements specified in paragraph (3) of this subsection.

“statistical area” applies in that section

The term “statistical area” means— (i) a metropolitan statistical area, and (ii) any county (or the portion thereof) which is not within a metropolitan statistical area. (B) Metropolitan statistical area

“targeted area residence” applies in that section

the term “targeted area residence” means a residence in an area which is either— (A) a qualified census tract, or (B) an area of chronic economic distress. (2) Qualified census tract (A) In general For purposes of paragraph (1),

“testing date” applies in that section

The term “testing date” means the earliest date on which all of the following requirements are met: (i) The indebtedness is federally-subsidized indebtedness. (ii) The taxpayer is liable in whole or part for payment of the indebtedness. (E) Income percentage

“applicable percentage” applies throughout its part

the term “applicable percentage” means— (A) 90 percent in the case of the program described in paragraph (1)(A), and (B) 95 percent in the case of the program described in paragraph (1)(B). (3) Student borrowers must be residents of issuing State, etc. A student loan shall be treated as being made or financed under a program described in paragraph (1) with respect to an issue only if the student is— (A) a resident of the State from which the volume cap under section 146 for such loan was derived, or (B) enrolled at an educational institution located in such State.

“blighted area” applies in that section

The term “blighted area” means any area which the governing body described in subparagraph (A) determines to be a blighted area on the basis of the substantial presence of factors such as excessive vacant land on which structures were previously located, abandoned or vacant buildings, substandard structures, vacancies, and delinquencies in payment of real property taxes.

“comparable property” applies in that section

the term “comparable property” means property which is of the same type as the property to which it is being compared and which is located within the jurisdiction of the designating governmental unit. (6) Use of proceeds requirements The use of the proceeds of an issue meets the requirements of this paragraph if— (A) not more than 25 percent of the net proceeds of such issue are to be used to provide (including the provision of land for) facilities described in subsection (a)(8) or section 147(e), and (B) no portion of the proceeds of such issue is to be used to provide (including the provision of land for) any private or commercial golf course, country club, massage parlor, hot tub …

“depreciable farm property” applies in that section

the term “depreciable farm property” means property of a character subject to the allowance for depreciation which is to be used in a trade or business of farming. (C) Prior issues taken into account In determining the amount of proceeds of an issue to be used as described in subparagraph (A), there shall be taken into account the aggregate amount of each prior issue to which paragraph (1) (or the corresponding provisions of prior law) applied which were or will be so used.

“designated blighted area” applies in that section

The term “designated blighted area” means any blighted area designated by the governing body of a local general purpose governmental unit in the jurisdiction of which such area is located. (B) Blighted area

“designation percentage” applies in that section

the term “designation percentage” means, with respect to any area, the percentage (determined at the time such area is designated) which the assessed value of real property located in such area is of the total assessed value of all real property located within the jurisdiction of the governmental unit which designated such area. (iii) Exception where bonds not outstanding The designation percentage of a previously designated blighted area shall not be taken into account under clause (i) if no qualified redevelopment bond (or similar bond) is or will be outstanding with respect to such area.

“financed area” applies in that section

the term “financed area” means, with respect to any issue, the portion of the designated blighted area with respect to which the proceeds of such issue are to be used. (8) Restriction on acquisition of land not to apply Section 147(c) (other than paragraphs (1)(B) and (2) thereof) shall not apply to any qualified redevelopment bond.

“manufacturing facility” applies in that section

The term “manufacturing facility” means any facility which is used in the manufacturing or production of tangible personal property (including the processing resulting in a change in the condition of such property). A rule similar to the rule of section 142(b)(2) shall apply for purposes of the preceding sentence. (ii) Certain facilities included Such term includes facilities which are directly related and ancillary to a manufacturing facility (determined without regard to this clause) if— (I) such facilities are located on the same site as the manufacturing facility, and (II) not more than 25 percent of the net proceeds of the issue are used to provide such facilities.

“qualified redevelopment bond” applies throughout its part

The term “qualified redevelopment bond” means any bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used for 1 or more redevelopment purposes in any designated blighted area.

“qualified small issue bond” applies throughout its part

the term “qualified small issue bond” means any bond issued as part of an issue the aggregate authorized face amount of which is $1,000,000 or less and 95 percent or more of the net proceeds of which are to be used— (A) for the acquisition, construction, reconstruction, or improvement of land or property of a character subject to the allowance for depreciation, or (B) to redeem part or all of a prior issue which was issued for purposes described in subparagraph (A) or this subparagraph.

“qualified student loan bond” applies throughout its part

The term “qualified student loan bond” means any bond issued as part of an issue the applicable percentage or more of the net proceeds of which are to be used directly or indirectly to make or finance student loans under— (A) a program of general application to which the Higher Education Act of 1965 applies if— (i) limitations are imposed under the program on— (I) the maximum amount of loans outstanding to any student, and (II) the maximum rate of interest payable on any loan, (ii) the loans are directly or indirectly guaranteed by the Federal Government, (iii) the financing of loans under the program is not limited by Federal law to the proceeds of tax-exempt bonds, and (iv) special …

“redevelopment purposes” applies throughout its part

The term “redevelopment purposes” means, with respect to any designated blighted area— (i) the acquisition (by a governmental unit having the power to exercise eminent domain) of real property located in such area, (ii) the clearing and preparation for redevelopment of land in such area which was acquired by such governmental unit, (iii) the rehabilitation of real property located in such area which was acquired by such governmental unit, and (iv) the relocation of occupants of such real property. (B) New construction not permitted The term “redevelopment purposes” does not include the construction (other than the rehabilitation) of any property or the enlargement of an existing building.

“test-period beneficiary” applies in that section

the term “test-period beneficiary” means any person who is an owner or a principal user of facilities being financed by the issue at any time during the 3-year period beginning on the later of— (i) the date such facilities were placed in service, or (ii) the date of issue. (E) Treatment of related persons For purposes of this paragraph, all persons who are related (within the meaning of paragraph (3)) to each other shall be treated as 1 person.

“qualified 501(c)(3) bond” applies in that section

the term “qualified 501(c)(3) bond” means any private activity bond issued as part of an issue if— (1) all property which is to be provided by the net proceeds of the issue is to be owned by a 501(c)(3) organization or a governmental unit, and (2) such bond would not be a private activity bond if— (A) 501(c)(3) organizations were treated as governmental units with respect to their activities which do not constitute unrelated trades or businesses, determined by applying section 513(a), and (B) paragraphs (1) and (2) of section 141(b) were applied by substituting “5 percent” for “10 percent” each place it appears and by substituting “net proceeds” for “proceeds” each place it appears.

“qualified hospital bond” applies in that section

the term “qualified hospital bond” means any bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used with respect to a hospital. (d) Restrictions on bonds used to provide residential rental housing for family units (1) In general Except as otherwise provided in this subsection, a bond which is part of an issue shall not be a qualified 501(c)(3) bond if any portion of the net proceeds of the issue are to be used directly or indirectly to provide residential rental property for family units.

“tax-exempt financing” applies in that section

The term “tax-exempt financing” means financing provided by tax-exempt bonds. (ii) Taxable financing

“taxable financing” applies in that section

The term “taxable financing” means financing which is not tax-exempt financing. (4) Substantial rehabilitation (A) In general Except as provided in subparagraph (B), rules similar to the rules of section 47(c)(1)(B) shall apply in determining for purposes of paragraph (2)(C) whether property is substantially rehabilitated. (B) Exception For purposes of subparagraph (A), clause (ii) of section 47(c)(1)(B) shall not apply, but the Secretary may extend the 24-month period in section 47(c)(1)(B)(i) where appropriate due to circumstances not within the control of the owner.

“carryforward purpose” applies in that section

The term “carryforward purpose” means— (A) the purpose of issuing exempt facility bonds described in 1 of the paragraphs of section 142(a), (B) the purpose of issuing qualified mortgage bonds or mortgage credit certificates, (C) the purpose of issuing qualified student loan bonds, and (D) the purpose of issuing qualified redevelopment bonds. (6) Special rules for increased volume cap under subsection (d)(5) No amount which is attributable to the increase under subsection (d)(5) may be used— (A) for any issue other than a qualified housing issue (as defined in subsection (d)(5)), or (B) to issue any bond after calendar year 2010.

“constitutional home rule city” applies in that section

the term “constitutional home rule city” means, with respect to any calendar year, any political subdivision of a State which, under a State constitution which was adopted in 1970 and effective on July 1, 1971 , had home rule powers on the 1st day of the calendar year.

“qualified housing issue” applies in that section

the term “qualified housing issue” means— (I) an issue described in section 142(a)(7) (relating to qualified residential rental projects), or (II) a qualified mortgage issue (determined by substituting “12-month period” for “42-month period” each place it appears in section 143(a)(2)(D)(i)). (e) State may provide for different allocation For purposes of this section— (1) In general Except as provided in paragraph (3), a State may, by law provide a different formula for allocating the State ceiling among the governmental units (or other authorities) in such State having authority to issue tax-exempt private activity bonds.

“applicable elected representative” applies in that section

The term “applicable elected representative” means with respect to any governmental unit— (I) an elected legislative body of such unit, or (II) the chief elected executive officer, the chief elected State legal officer of the executive branch, or any other elected official of such unit designated for purposes of this paragraph by such chief elected executive officer or by State law.

“farm” applies in that section

the term “farm” has the meaning given such term by section 6420(c)(2). (E) Substantial farmland For purposes of this paragraph,

“first-time farmer” applies in that section

The term “first-time farmer” means any individual if such individual— (I) has not at any time had any direct or indirect ownership interest in substantial farmland in the operation of which such individual materially participated, and (II) has not received financing under this paragraph in an amount which, when added to the financing to be provided under this paragraph, exceeds the amount in effect under subparagraph (A). (ii) Aggregation rules Any ownership or material participation, or financing received, by an individual’s spouse or minor child shall be treated as ownership and material participation, or financing received, by the individual.

“rehabilitation expenditures” applies in that section

the term “rehabilitation expenditures” means any amount properly chargeable to capital account which is incurred by the person acquiring the building for property (or additions or improvements to property) in connection with the rehabilitation of a building. In the case of an integrated operation contained in a building before its acquisition, such term includes rehabilitating existing equipment in such building or replacing it with equipment having substantially the same function. For purposes of this subparagraph, any amount incurred by a successor to the person acquiring the building or by the seller under a sales contract with such person shall be treated as incurred by such person.

“substantial farmland” applies in that section

the term “substantial farmland” means any parcel of land unless such parcel is smaller than 30 percent of the median size of a farm in the county in which such parcel is located. (F) Used equipment limitation For purposes of this paragraph, in no event may the amount of financing provided by reason of this paragraph to a first-time farmer for personal property— (i) of a character subject to the allowance for depreciation, (ii) the original use of which does not begin with such farmer, and (iii) which is to be used for farming purposes, exceed $62,500. A rule similar to the rule of subparagraph (C)(ii) shall apply for purposes of the preceding sentence.

“applicable share” applies in that section

the term “applicable share” means, with respect to any period, the natural gas allocable to such period if the gas were allocated ratably over the period to which the prepayment relates. (G) Intentional acts Subparagraph (A) shall cease to apply to any issue if the utility owned by the governmental unit engages in any intentional act to render the volume of natural gas acquired by such prepayment to be in excess of the sum of— (i) the amount of natural gas needed (other than for resale) by customers of such utility who are located within the service area of such utility, and (ii) the amount of natural gas used to transport such natural gas to the utility.

“arbitrage bond” applies in that section

the term “arbitrage bond” means any bond issued as part of an issue any portion of the proceeds of which are reasonably expected (at the time of issuance of the bond) to be used directly or indirectly— (1) to acquire higher yielding investments, or (2) to replace funds which were used directly or indirectly to acquire higher yielding investments. For purposes of this subsection, a bond shall be treated as an arbitrage bond if the issuer intentionally uses any portion of the proceeds of the issue of which such bond is a part in a manner described in paragraph (1) or (2). (b) Higher yielding investments For purposes of this section— (1) In general

“available construction proceeds” applies in that section

The term “available construction proceeds” means the amount equal to the issue price (within the meaning of sections 1273 and 1274) of the construction issue, increased by earnings on the issue price, earnings on amounts in any reasonably required reserve or replacement fund not funded from the issue, and earnings on all of the foregoing earnings, and reduced by the amount of the issue price in any reasonably required reserve or replacement fund and the issuance costs financed by the issue.

“construction” applies in that section

the term “construction” includes reconstruction and rehabilitation, and rules similar to the rules of section 142(b)(1)(B) shall apply. (v) Portions of issues used for construction If— (I) all of the construction expenditures to be financed by an issue are to be financed from a portion thereof, and (II) the issuer elects to treat such portion as a construction issue for purposes of this subparagraph, then, for purposes of this subparagraph and subparagraph (B), such portion shall be treated as a separate issue. (vi) Available construction proceeds For purposes of this subparagraph— (I) In general

“construction issue” applies in that section

the term “construction issue” means any issue if— (I) at least 75 percent of the available construction proceeds of such issue are to be used for construction expenditures with respect to property which is to be owned by a governmental unit or a 501(c)(3) organization, and (II) all of the bonds which are part of such issue are qualified 501(c)(3) bonds, bonds which are not private activity bonds, or private activity bonds issued to finance property to be owned by a governmental unit or a 501(c)(3) organization. For purposes of this subparagraph,

“cumulative cash flow deficit” applies in that section

the term “cumulative cash flow deficit” means, as of the date of computation, the excess of the expenses paid during the period described in subclause (III) which would ordinarily be paid out of or financed by anticipated tax or other revenues over the aggregate amount available (other than from the proceeds of the issue) during such period for the payment of such expenses. (III) Period involved For purposes of subclause (II), the period described in this subclause is the period beginning on the date of issuance of the issue and ending on the earlier of the date 6 months after such date of issuance or the date of the computation of cumulative cash flow deficit.

“higher yielding investments” applies in that section

The term “higher yielding investments” means any investment property which produces a yield over the term of the issue which is materially higher than the yield on the issue. (2) Investment property

“investment property” applies in that section

The term “investment property” means— (A) any security (within the meaning of section 165(g)(2)(A) or (B)), (B) any obligation, (C) any annuity contract, (D) any investment-type property, or (E) in the case of a bond other than a private activity bond, any residential rental property for family units which is not located within the jurisdiction of the issuer and which is not acquired to implement a court ordered or approved housing desegregation plan. (3) Alternative minimum tax bonds treated as investment property in certain cases (A) In general Except as provided in subparagraph (B), the term “investment property” does not include any tax-exempt bond.

“nonpurpose investment” applies in that section

The term “nonpurpose investment” means any investment property which— (i) is acquired with the gross proceeds of an issue, and (ii) is not acquired in order to carry out the governmental purpose of the issue. (B) Gross proceeds Except as otherwise provided by the Secretary, the gross proceeds of an issue include— (i) amounts received (including repayments of principal) as a result of investing the original proceeds of the issue, and (ii) amounts to be used to pay debt service on the issue.

“qualified natural gas supply contract” applies in that section

the term “qualified natural gas supply contract” means any contract to acquire natural gas for resale by a utility owned by a governmental unit if the amount of gas permitted to be acquired under the contract by the utility during any year does not exceed the sum of— (i) the annual average amount during the testing period of natural gas purchased (other than for resale) by customers of such utility who are located within the service area of such utility, and (ii) the amount of natural gas to be used to transport the prepaid natural gas to the utility during such year.

“testing period” applies in that section

the term “testing period” means, with respect to an issue, the most recent 5 calendar years ending before the date of issuance of the issue. (I) Service area For purposes of this paragraph, the service area of a utility owned by a governmental unit shall be comprised of— (i) any area throughout which such utility provided at all times during the testing period— (I) in the case of a natural gas utility, natural gas transmission or distribution services, and (II) in the case of an electric utility, electricity distribution services, (ii) any area within a county contiguous to the area described in clause (i) in which retail customers of such utility are located if such area is not also served …

“federally insured deposit or account” applies in that section

The term “federally insured deposit or account” means any deposit or account in a financial institution to the extent such deposit or account is insured under Federal law by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, the National Credit Union Administration, or any similar federally chartered corporation.

“hedge bond” applies in that section

the term “hedge bond” means any bond issued as part of an issue unless— (i) the issuer reasonably expects that 85 percent of the spendable proceeds of the issue will be used to carry out the governmental purposes of the issue within the 3-year period beginning on the date the bonds are issued, and (ii) not more than 50 percent of the proceeds of the issue are invested in nonpurpose investments (as defined in section 148(f)(6)(A)) having a substantially guaranteed yield for 4 years or more.

“net proceeds” applies in that section

the term “net proceeds” has the meaning given such term by section 150 but shall not include proceeds used to finance issuance costs and shall not include proceeds necessary to pay interest (during such period) on the bonds which are part of the issue. (D) Refunding bonds For purposes of subparagraph (A), in the case of a refunding bond, the date of issuance taken into account is the date of issuance of the original bond.

“pooled financing bond” applies in that section

The term “pooled financing bond” means any bond issued as part of an issue more than $5,000,000 of the proceeds of which are reasonably expected (at the time of the issuance of the bonds) to be used (or are intentionally used) directly or indirectly to make or finance loans to 2 or more ultimate borrowers. (B) Exceptions Such term shall not include any bond if— (i) section 146 applies to the issue of which such bond is a part (other than by reason of section 141(b)(5)) or would apply but for section 146(i), or (ii) section 143( l )(3) applies to such issue.

“registration-required bond” applies in that section

the term “registration-required bond” means any bond other than a bond which— (A) is not of a type offered to the public, or (B) has a maturity (at issue) of not more than 1 year. (3) Special rules (A) Book entries permitted For purposes of paragraph (1), a book entry bond shall be treated as in registered form if the right to the principal of, and stated interest on, such bond may be transferred only through a book entry consistent with regulations prescribed by the Secretary. (B) Nominees The Secretary shall prescribe such regulations as may be necessary to carry out the purpose of paragraph (1) where there is a nominee or chain of nominees.

“501(c)(3) organization” applies throughout its part

The term “501(c)(3) organization” means any organization described in section 501(c)(3) and exempt from tax under section 501(a). (5) Ownership of property Property shall be treated as owned by a governmental unit if it is owned on behalf of such unit. (6) Tax-exempt bond

“bond” applies throughout its part

The term “bond” includes any obligation. (2) Governmental unit not to include Federal Government The term “governmental unit” does not include the United States or any agency or instrumentality thereof. (3) Net proceeds

“independent member” applies in that section

The term “independent member” means a member of the board of directors of the issuer who (except for services as a member of such board) receives no compensation directly or indirectly— (i) for services performed in connection with such transferee corporation, or (ii) for services as a member of the board of directors or as an officer of such transferee corporation. For purposes of clause (ii),

“net proceeds” applies throughout its part

The term “net proceeds” means, with respect to any issue, the proceeds of such issue reduced by amounts in a reasonably required reserve or replacement fund. (4) 501(c)(3) organization

“officer” applies in that section

the term “officer” includes any individual having powers or responsibilities similar to those of officers. (F) Coordination with certain private foundation taxes For purposes of sections 4942 (relating to the excise tax on a failure to distribute income) and 4943 (relating to the excise tax on excess business holdings), the transferee corporation referred to in subparagraph (B) shall be treated as a functionally related business (within the meaning of section 4942(j)(4)) with respect to the issuer during the period commencing with the date on which an election is made under this paragraph and ending on the date that is the earlier of— (i) the last day of the last taxable year for which more …

“qualified scholarship funding bond” applies throughout its part

The term “qualified scholarship funding bond” means a bond issued by a corporation which— (A) is a corporation not for profit established and operated exclusively for the purpose of acquiring student loan notes incurred under the Higher Education Act of 1965, and (B) is organized at the request of the State or 1 or more political subdivisions thereof or is requested to exercise such power by 1 or more political subdivisions and required by its corporate charter and bylaws, or required by State law, to devote any income (after payment of expenses, debt service, and the creation of reserves for the same) to the purchase of additional student loan notes or to pay over any income to the United …

“qualified volunteer fire department” applies in that section

the term “qualified volunteer fire department” means, with respect to a political subdivision of a State, any organization— (A) which is organized and operated to provide firefighting or emergency medical services for persons in an area (within the jurisdiction of such political subdivision) which is not provided with any other firefighting services, and (B) which is required (by written agreement) by the political subdivision to furnish firefighting services in such area.

“senior stock” applies in that section

the term “senior stock” means stock— (i) which participates pro rata and fully in the equity value of the corporation with all other common stock of the corporation but which has the right to payment of liquidation proceeds prior to payment of liquidation proceeds in respect of other common stock of the corporation; (ii) which has a fixed right upon liquidation and upon redemption to an amount equal to the greater of— (I) the fair market value of such stock on the date of liquidation or redemption (whichever is applicable); or (II) the fair market value of all assets transferred in exchange for such stock and reduced by the amount of all liabilities of the corporation which has made an …

“tax-exempt” applies throughout its part

The term “tax-exempt” means, with respect to any bond (or issue), that the interest on such bond (or on the bonds issued as part of such issue) is excluded from gross income. (b) Change in use of facilities financed with tax-exempt private activity bonds (1) Mortgage revenue bonds (A) In general In the case of any residence with respect to which financing is provided from the proceeds of a tax-exempt qualified mortgage bond or qualified veterans’ mortgage bond, if there is a continuous period of at least 1 year during which such residence is not the principal residence of at least 1 of the mortgagors who received such financing, then no deduction shall be allowed under this chapter for …

“applicable percentage” applies in that section

the term “applicable percentage” means 2 percentage points for each $2,500 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b). 1 In the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting “$1,250” for “$2,500”. In no event shall the applicable percentage exceed 100 percent. (C) Coordination with other provisions The provisions of this paragraph shall not apply for purposes of determining whether a deduction under this section with respect to any individual is allowable to another taxpayer for any taxable year.

“exemption amount” applies in that section

the term “exemption amount” means $2,000. (2) Exemption amount disallowed in case of certain dependents In the case of an individual with respect to whom a deduction under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the exemption amount applicable to such individual for such individual’s taxable year shall be zero. (3) Phaseout (A) In general In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the applicable amount in effect under section 68(b), 1 the exemption amount shall be reduced by the applicable percentage.

“modified adjusted gross income” applies in that section

the term “modified adjusted gross income” means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (iv) Social security number required (I) In general Clause (i) shall not apply with respect to a qualified individual unless the taxpayer includes such qualified individual’s social security number on the return of tax for the taxable year. (II) Social security number For purposes of subclause (I),

“qualified individual” applies in that section

the term “qualified individual” means— (I) the taxpayer, if the taxpayer has attained age 65 before the close of the taxable year, and (II) in the case of a joint return, the taxpayer’s spouse, if such spouse has attained age 65 before the close of the taxable year. (iii) Limitation based on modified adjusted gross income (I) In general In the case of any taxpayer for any taxable year, the $6,000 amount in clause (i) shall be reduced (but not below zero) by 6 percent of so much of the taxpayer’s modified adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return). (II) Modified adjusted gross income For purposes of this clause,

“social security number” applies in that section

the term “social security number” has the meaning given such term in section 24(h)(7). (v) Married individuals If the taxpayer is a married individual (within the meaning of section 7703), this subparagraph shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year. (e) Identifying information required No exemption shall be allowed under this section with respect to any individual unless the TIN of such individual is included on the return claiming the exemption.

“alimony or separate maintenance payment” applies in that section

the term “alimony or separate maintenance payment” means any payment in cash if— (i) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument (as defined in section 121(d)(3)(C)), (ii) in the case of an individual legally separated from the individual’s spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and (iii) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the …

“brother” applies in that section

The terms “brother” and “sister” include a brother or sister by the half blood. (5) Special support test in case of students For purposes of subsections (c)(1)(D) and (d)(1)(C), in the case of an individual who is— (A) a child of the taxpayer, and (B) a student, amounts received as scholarships for study at an educational organization described in section 170(b)(1)(A)(ii) shall not be taken into account.

“child” applies in that section

The term “child” means an individual who is— (i) a son, daughter, stepson, or stepdaughter of the taxpayer, or (ii) an eligible foster child of the taxpayer. (B) Adopted child In determining whether any of the relationships specified in subparagraph (A)(i) or paragraph (4) exists, a legally adopted individual of the taxpayer, or an individual who is lawfully placed with the taxpayer for legal adoption by the taxpayer, shall be treated as a child of such individual by blood. (C) Eligible foster child For purposes of subparagraph (A)(ii),

“custodial parent” applies in that section

The term “custodial parent” means the parent having custody for the greater portion of the calendar year. (B) Noncustodial parent

“dependent” applies in that section

the term “dependent” means— (1) a qualifying child, or (2) a qualifying relative. (b) Exceptions For purposes of this section— (1) Dependents ineligible If an individual is a dependent of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall be treated as having no dependents for any taxable year of such individual beginning in such calendar year. (2) Married dependents An individual shall not be treated as a dependent of a taxpayer under subsection (a) if such individual has made a joint return with the individual’s spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.

“eligible foster child” applies in that section

the term “eligible foster child” means an individual who is placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. (2) Student defined

“noncustodial parent” applies in that section

The term “noncustodial parent” means the parent who is not the custodial parent. (5) Exception for multiple-support agreement This subsection shall not apply in any case where over one-half of the support of the child is treated as having been received from a taxpayer under the provision of subsection (d)(3). (6) Special rule for support received from new spouse of parent For purposes of this subsection, in the case of the remarriage of a parent, support of a child received from the parent’s spouse shall be treated as received from the parent. (f) Other definitions and rules For purposes of this section— (1) Child defined (A) In general

“qualified pre-1985 instrument” applies in that section

the term “qualified pre-1985 instrument” means any decree of divorce or separate maintenance or written agreement— (i) which is executed before January 1, 1985 , (ii) which on such date contains the provision described in subparagraph (A)(i), and (iii) which is not modified on or after such date in a modification which expressly provides that this paragraph shall not apply to such decree or agreement. (4) Custodial parent and noncustodial parent For purposes of this subsection— (A) Custodial parent

“qualifying child” applies in that section

The term “qualifying child” means, with respect to any taxpayer for any taxable year, an individual— (A) who bears a relationship to the taxpayer described in paragraph (2), (B) who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, (C) who meets the age requirements of paragraph (3), (D) who has not provided over one-half of such individual’s own support for the calendar year in which the taxable year of the taxpayer begins, and (E) who has not filed a joint return (other than only for a claim of refund) with the individual’s spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the …

“qualifying relative” applies in that section

The term “qualifying relative” means, with respect to any taxpayer for any taxable year, an individual— (A) who bears a relationship to the taxpayer described in paragraph (2), (B) whose gross income for the calendar year in which such taxable year begins is less than the exemption amount (as defined in section 151(d)), (C) with respect to whom the taxpayer provides over one-half of the individual’s support for the calendar year in which such taxable year begins, and (D) who is not a qualifying child of such taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which such taxable year begins.

“sheltered workshop” applies in that section

the term “sheltered workshop” means a school— (i) which provides special instruction or training designed to alleviate the disability of the individual, and (ii) which is operated by an organization described in section 501(c)(3) and exempt from tax under section 501(a), or by a State, a possession of the United States, any political subdivision of any of the foregoing, the United States, or the District of Columbia.

“sister” applies in that section

The terms “brother” and “sister” include a brother or sister by the half blood. (5) Special support test in case of students For purposes of subsections (c)(1)(D) and (d)(1)(C), in the case of an individual who is— (A) a child of the taxpayer, and (B) a student, amounts received as scholarships for study at an educational organization described in section 170(b)(1)(A)(ii) shall not be taken into account.

“student” applies in that section

The term “student” means an individual who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins— (A) is a full-time student at an educational organization described in section 170(b)(1)(A)(ii), or (B) is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization described in section 170(b)(1)(A)(ii) or of a State or political subdivision of a State.

“allocable limitation amount” applies in that section

the term “allocable limitation amount” means, with respect to any member of the controlled group referred to in subparagraph (A) with respect to any specified covered employee of such controlled group, the amount which bears the same ratio to $1,000,000 as— (i) the amount of applicable employee remuneration provided by such member with respect to such specified covered employee, bears to (ii) the aggregate amount of applicable employee remuneration provided by all such members with respect to such specified covered employee. (C) Specified covered employee For purposes of this paragraph,

“applicable employee remuneration” applies in that section

the term “applicable employee remuneration” means, with respect to any covered employee for any taxable year, the aggregate amount allowable as a deduction under this chapter for such taxable year (determined without regard to this subsection) for remuneration for services performed by such employee (whether or not during the taxable year). (B) Exception for existing binding contracts The term “applicable employee remuneration” shall not include any remuneration payable under a written binding contract which was in effect on February 17, 1993 , and which was not modified thereafter in any material respect before such remuneration is paid. (C) Remuneration For purposes of this paragraph,

“applicable employer” applies in that section

the term “applicable employer” means any employer from whom 1 or more troubled assets are acquired under a program established by the Secretary under section 101(a) of the Emergency Economic Stabilization Act of 2008 if the aggregate amount of the assets so acquired for all taxable years exceeds $300,000,000.

“applicable individual” applies in that section

the term “applicable individual” means, with respect to any covered health insurance provider for any disqualified taxable year, any individual— (i) who is an officer, director, or employee in such taxable year, or (ii) who provides services for or on behalf of such covered health insurance provider during such taxable year. (G) Coordination Rules similar to the rules of subparagraphs (D) and (E) of paragraph (4) shall apply for purposes of this paragraph. (H) Regulatory authority The Secretary may prescribe such guidance, rules, or regulations as are necessary to carry out the purposes of this paragraph.

“applicable individual remuneration” applies in that section

the term “applicable individual remuneration” means, with respect to any applicable individual for any disqualified taxable year, the aggregate amount allowable as a deduction under this chapter for such taxable year (determined without regard to this subsection) for remuneration (as defined in paragraph (4) without regard to subparagraph (B) thereof) for services performed by such individual (whether or not during the taxable year). Such term shall not include any deferred deduction remuneration with respect to services performed during the disqualified taxable year. (E) Deferred deduction remuneration For purposes of this paragraph,

“applicable percentage” applies in that section

the term “applicable percentage” means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which— (A) the excess of— (i) the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over (ii) $10,000,000,000, bears to (B) $40,000,000,000. (4) FDIC premiums For purposes of this subsection,

“applicable taxable year” applies in that section

the term “applicable taxable year” means, with respect to any employer— (i) the first taxable year of the employer— (I) which includes any portion of the period during which the authorities under section 101(a) of the Emergency Economic Stabilization Act of 2008 are in effect (determined under section 120 thereof), and (II) in which the aggregate amount of troubled assets acquired from the employer during the taxable year pursuant to such authorities (other than assets to which subparagraph (B)(ii) applies), when added to the aggregate amount so acquired for all preceding taxable years, exceeds $300,000,000, and (ii) any subsequent taxable year which includes any portion of such period.

“broadcast undertaking” applies in that section

the term “broadcast undertaking” includes (but is not limited to) radio and television stations. (k) Stock reacquisition expenses (1) In general Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred by a corporation in connection with the reacquisition of its stock or of the stock of any related person (as defined in section 465(b)(3)(C)).

“controlled group” applies in that section

the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or ( o ) of section 414. (n) Special rule for certain group health plans (1) In general No deduction shall be allowed under this chapter to an employer for any amount paid or incurred in connection with a group health plan if the plan does not reimburse for inpatient hospital care services provided in the State of New York— (A) except as provided in subparagraphs (B) and (C), at the same rate as licensed commercial insurers are required to reimburse hospitals for such services when such reimbursement is not through such a plan, (B) in the case of any reimbursement through a health …

“covered employee” applies in that section

the term “covered employee” means any employee of the taxpayer if— (A) such employee is the principal executive officer or principal financial officer of the taxpayer at any time during the taxable year, or was an individual acting in such a capacity, (B) the total compensation of such employee for the taxable year is required to be reported to shareholders under the Securities Exchange Act of 1934 by reason of such employee being among the 3 highest compensated officers for the taxable year (other than any individual described in subparagraph (A)), (C) in the case of taxable years beginning after December 31, 2026 , such employee is among the 5 highest compensated employees for the taxable …

“covered executive” applies in that section

The term “covered executive” means, with respect to any applicable taxable year, any employee— (I) who, at any time during the portion of the taxable year during which the authorities under section 101(a) of the Emergency Economic Stabilization Act of 2008 are in effect (determined under section 120 thereof), is the chief executive officer of the applicable employer or the chief financial officer of the applicable employer, or an individual acting in either such capacity, or (II) who is described in clause (ii).

“covered executive branch official” applies in that section

the term “covered executive branch official” means— (A) the President, (B) the Vice President, (C) any officer or employee of the White House Office of the Executive Office of the President, and the 2 most senior level officers of each of the other agencies in such Executive Office, and (D) (i) any individual serving in a position in level I of the Executive Schedule under section 5312 of title 5 , United States Code, (ii) any other individual designated by the President as having Cabinet level status, and (iii) any immediate deputy of an individual described in clause (i) or (ii).

“covered health insurance provider” applies in that section

The term “covered health insurance provider” means— (I) with respect to taxable years beginning after December 31, 2009 , and before January 1, 2013 , any employer which is a health insurance issuer (as defined in section 9832(b)(2)) and which receives premiums from providing health insurance coverage (as defined in section 9832(b)(1)), and (II) with respect to taxable years beginning after December 31, 2012 , any employer which is a health insurance issuer (as defined in section 9832(b)(2)) and with respect to which not less than 25 percent of the gross premiums received from providing health insurance coverage (as defined in section 9832(b)(1)) is from minimum essential coverage (as …

“deferred deduction executive remuneration” applies in that section

the term “deferred deduction executive remuneration” means remuneration which would be executive remuneration for services performed in an applicable taxable year but for the fact that the deduction under this chapter (determined without regard to this paragraph) for such remuneration is allowable in a subsequent taxable year. (G) Coordination Rules similar to the rules of subparagraphs (D) and (E) of paragraph (4) shall apply for purposes of this paragraph.

“deferred deduction remuneration” applies in that section

the term “deferred deduction remuneration” means remuneration which would be applicable individual remuneration for services performed in a disqualified taxable year but for the fact that the deduction under this chapter (determined without regard to this paragraph) for such remuneration is allowable in a subsequent taxable year. (F) Applicable individual For purposes of this paragraph,

“disqualified taxable year” applies in that section

the term “disqualified taxable year” means, with respect to any employer, any taxable year for which such employer is a covered health insurance provider. (C) Covered health insurance provider For purposes of this paragraph— (i) In general

“executive remuneration” applies in that section

the term “executive remuneration” means the applicable employee remuneration of the covered executive, as determined under paragraph (4) without regard to subparagraph (B) thereof. Such term shall not include any deferred deduction executive remuneration with respect to services performed in a prior applicable taxable year. (F) Deferred deduction executive remuneration For purposes of this paragraph,

“expanded affiliated group” applies in that section

the term “expanded affiliated group” means an affiliated group as defined in section 1504(a), determined— (I) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and (II) without regard to paragraphs (2) and (3) of section 1504(b). (ii) Control of non-corporate entities A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this clause).

“FDIC premium” applies in that section

the term “FDIC premium” means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act ( 12 U.S.C. 1817(b) ). (5) Total consolidated assets For purposes of this subsection,

“group health plan” applies in that section

the term “group health plan” means a plan of, or contributed to by, an employer or employee organization (including a self-insured plan) to provide health care (directly or otherwise) to any employee, any former employee, the employer, or any other individual associated or formerly associated with the employer in a business relationship, or any member of their family.

“in-house expenditures” applies in that section

the term “in-house expenditures” means expenditures described in paragraphs (1)(A) and (D) other than— (I) payments by the taxpayer to a person engaged in the trade or business of conducting activities described in paragraph (1) for the conduct of such activities on behalf of the taxpayer, or (II) dues or other similar amounts paid or incurred by the taxpayer which are allocable to activities described in paragraph (1).

“influencing legislation” applies in that section

The term “influencing legislation” means any attempt to influence any legislation through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of legislation. (B) Legislation

“legislation” applies in that section

The term “legislation” has the meaning given such term by section 4911(e)(2). (4) Other special rules (A) Exception for certain taxpayers In the case of any taxpayer engaged in the trade or business of conducting activities described in paragraph (1), paragraph (1) shall not apply to expenditures of the taxpayer in conducting such activities directly on behalf of another person (but shall apply to payments by such other person to the taxpayer for conducting such activities). (B) De minimis exception (i) In general Paragraph (1) shall not apply to any in-house expenditures for any taxable year if such expenditures do not exceed $2,000.

“publicly held corporation” applies in that section

the term “publicly held corporation” means any corporation which is an issuer (as defined in section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c ))— (A) the securities of which are required to be registered under section 12 of such Act ( 15 U.S.C. 78 l ), or (B) that is required to file reports under section 15(d) of such Act ( 15 U.S.C. 78 o (d)). (3) Covered employee For purposes of this subsection,

“qualified reimbursements” applies in that section

the term “qualified reimbursements” means the amounts paid by the United States Postal Service to employees as an equipment maintenance allowance under the 1991 collective bargaining agreement between the United States Postal Service and the National Rural Letter Carriers’ Association.

“remuneration” applies in that section

the term “remuneration” includes any remuneration (including benefits) in any medium other than cash, but shall not include— (i) any payment referred to in so much of section 3121(a)(5) as precedes subparagraph (E) thereof, and (ii) any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from gross income under this chapter. For purposes of clause (i), section 3121(a)(5) shall be applied without regard to section 3121(v)(1).

“specified covered employee” applies in that section

the term “specified covered employee” means, with respect to any controlled group— (i) any employee described in subparagraph (A), (B), or (D) of paragraph (3), with respect to the publicly held corporation which is a member of such controlled group, and (ii) any employee who would be described in subparagraph (C) of paragraph (3) if such subparagraph were applied by taking into account the employees of all members of the controlled group. (D) Controlled group For purposes of this paragraph,

“total consolidated assets” applies in that section

the term “total consolidated assets” has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5365 ). (6) Aggregation rule (A) In general Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection. (B) Expanded affiliated group (i) In general For purposes of this paragraph,

“acquisition indebtedness” applies in that section

The term “acquisition indebtedness” means any indebtedness which— (I) is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and (II) is secured by such residence. Such term also includes any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

“activity” applies in that section

the terms “activity”, “passive activity”, and “materially participate” have the meanings given such terms by section 469. (e) Original issue discount (1) In general The portion of the original issue discount with respect to any debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year. (2) Definitions and special rules For purposes of this subsection— (A) Debt instrument

“adjusted taxable income” applies in that section

the term “adjusted taxable income” means the taxable income of the taxpayer— (A) computed without regard to— (i) any item of income, gain, deduction, or loss which is not properly allocable to a trade or business, (ii) any business interest or business interest income, (iii) the amount of any net operating loss deduction under section 172, (iv) the amount of any deduction allowed under section 199A, (v) any deduction allowable for depreciation, amortization, or depletion, and (vi) the amounts included in gross income under sections 951(a), 951A(a), and 78 (and the portion of the deductions allowed under sections 245A(a) (by reason of section 964(e)(4)) and 250(a)(1)(B) by reason of such …

“applicable high yield discount obligation” applies in that section

the term “applicable high yield discount obligation” means any debt instrument if— (A) the maturity date of such instrument is more than 5 years from the date of issue, (B) the yield to maturity on such instrument equals or exceeds the sum of— (i) the applicable Federal rate in effect under section 1274(d) for the calendar month in which the obligation is issued, plus (ii) 5 percentage points, and (C) such instrument has significant original issue discount.

“applicable passenger vehicle” applies in that section

The term “applicable passenger vehicle” means any vehicle— (i) the original use of which commences with the taxpayer, (ii) which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), (iii) which has at least 2 wheels, (iv) which is a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle, (v) which is treated as a motor vehicle for purposes of title II of the Clean Air Act, and (vi) which has a gross vehicle weight rating of less than 14,000 pounds. Such term shall not include any vehicle the final assembly of which did not occur within the United States.

“business interest” applies in that section

the term “business interest” means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)). Such term shall not include any interest which is capitalized under section 263(g) or 263A(f). (6) Business interest income For purposes of this subsection,

“business interest income” applies in that section

the term “business interest income” means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business. Such term shall not include investment income (within the meaning of subsection (d)).

“dealer in securities” applies in that section

the term “dealer in securities” has the meaning given such term by section 475. (6) Related party For purposes of this subsection, a person is a related party with respect to another person if such person bears a relationship to such other person described in section 267(b) or 707(b). (7) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations preventing avoidance of this subsection through the use of an issuer other than a corporation.

“debt instrument” applies in that section

The term “debt instrument” has the meaning given such term by section 1275(a)(1). (B) Daily portions The daily portion of the original issue discount for any day shall be determined under section 1272(a) (without regard to paragraph (7) thereof and without regard to section 1273(a)(3)). (C) Short-term obligations In the case of an obligor of a short-term obligation (as defined in section 1283(a)(1)(A)) who uses the cash receipts and disbursements method of accounting, the original issue discount (and any other interest payable) on such obligation shall be deductible only when paid.

“disqualified debt instrument” applies in that section

the term “disqualified debt instrument” means any indebtedness of a corporation which is payable in equity of the issuer or a related party or equity held by the issuer (or any related party) in any other person.

“disqualified yield” applies in that section

the term “disqualified yield” means the excess of the yield to maturity on the obligation over the sum referred to in subsection (i)(1)(B) plus 1 percentage point, and the term “total return” is the amount which would have been the original issue discount on the obligation if interest described in the parenthetical in section 1273(a)(2) were included in the stated redemption price at maturity. (D) Exception for S corporations This paragraph shall not apply to any obligation issued by any corporation for any period for which such corporation is an S corporation.

“educational services” applies in that section

the term “educational services” means any service (including lodging) which is purchased from an educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization. (2) Limitation In the case of any contract to which paragraph (1) applies, the amount treated as interest for any taxable year shall not exceed the aggregate carrying charges which are properly attributable to such taxable year. (c) Redeemable ground rents For purposes of this subtitle, any annual or periodic rental under a redeemable ground rent (excluding amounts in redemption thereof) shall be treated as interest on an indebtedness secured by a mortgage.

“electing farming business” applies in that section

the term “electing farming business” means— (i) a farming business (as defined in section 263A(e)(4)) which makes an election under this subparagraph, or (ii) any trade or business of a specified agricultural or horticultural cooperative (as defined in section 199A(g)(2)) 1 with respect to which the cooperative makes an election under this subparagraph. Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable. (8) Adjusted taxable income For purposes of this subsection,

“electing real property trade or business” applies in that section

the term “electing real property trade or business” means any trade or business which is described in section 469(c)(7)(C) and which makes an election under this subparagraph. Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable. (C) Electing farming business For purposes of this paragraph,

“excess taxable income” applies in that section

The term “excess taxable income” means, with respect to any partnership, the amount which bears the same ratio to the partnership’s adjusted taxable income as— (i) the excess (if any) of— (I) the amount determined for the partnership under paragraph (1)(B), over (II) the amount (if any) by which the business interest of the partnership, reduced by the floor plan financing interest, exceeds the business interest income of the partnership, bears to (ii) the amount determined for the partnership under paragraph (1)(B). (D) Application to S corporations Rules similar to the rules of subparagraphs (A) and (C) shall apply with respect to any S corporation and its shareholders.

“final assembly” applies in that section

the term “final assembly” means the process by which a manufacturer produces a vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.

“floor plan financing indebtedness” applies in that section

The term “floor plan financing indebtedness” means indebtedness— (i) used to finance the acquisition of motor vehicles held for sale or lease, and (ii) secured by the inventory so acquired. (C) Motor vehicle

“floor plan financing interest” applies in that section

The term “floor plan financing interest” means interest paid or accrued on floor plan financing indebtedness. (B) Floor plan financing indebtedness

“home equity indebtedness” applies in that section

The term “home equity indebtedness” means any indebtedness (other than acquisition indebtedness) secured by a qualified residence to the extent the aggregate amount of such indebtedness does not exceed— (I) the fair market value of such qualified residence, reduced by (II) the amount of acquisition indebtedness with respect to such residence. (ii) Limitation The aggregate amount treated as home equity indebtedness for any period shall not exceed $100,000 ($50,000 in the case of a separate return by a married individual).

“interest” applies in that section

the term “interest” includes any amount allowable as a deduction in connection with personal property used in a short sale. (4) Net investment income For purposes of this subsection— (A) In general

“interest capitalization provision” applies in that section

the term “interest capitalization provision” means any provision of this subtitle under which interest— (i) is required to be charged to capital account, or (ii) may be deducted or charged to capital account. (11) Regulatory authority The Secretary shall issue such regulations or guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or guidance to determine which business interest is taken into account under this subsection and section 59A(c)(3).

“investment expenses” applies in that section

The term “investment expenses” means the deductions allowed under this chapter (other than for interest) which are directly connected with the production of investment income. (D) Income and expenses from passive activities Investment income and investment expenses shall not include any income or expenses taken into account under section 469 in computing income or loss from a passive activity. (5) Property held for investment For purposes of this subsection— (A) In general

“investment income” applies in that section

The term “investment income” means the sum of— (i) gross income from property held for investment (other than any gain taken into account under clause (ii)(I)), (ii) the excess (if any) of— (I) the net gain attributable to the disposition of property held for investment, over (II) the net capital gain determined by only taking into account gains and losses from dispositions of property held for investment, plus (iii) so much of the net capital gain referred to in clause (ii)(II) (or, if lesser, the net gain referred to in clause (ii)(I)) as the taxpayer elects to take into account under this clause.

“investment interest” applies in that section

The term “investment interest” means any interest allowable as a deduction under this chapter (determined without regard to paragraph (1)) which is paid or accrued on indebtedness properly allocable to property held for investment. (B) Exceptions The term “investment interest” shall not include— (i) any qualified residence interest (as defined in subsection (h)(3)), or (ii) any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer. (C) Personal property used in short sale For purposes of this paragraph,

“materially participate” applies in that section

the terms “activity”, “passive activity”, and “materially participate” have the meanings given such terms by section 469. (e) Original issue discount (1) In general The portion of the original issue discount with respect to any debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year. (2) Definitions and special rules For purposes of this subsection— (A) Debt instrument

“modified adjusted gross income” applies in that section

the term “modified adjusted gross income” means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (D) Applicable passenger vehicle

“motor vehicle” applies in that section

The term “motor vehicle” means a motor vehicle that is any of the following: (i) Any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road. (ii) A boat. (iii) Farm machinery or equipment. Such term shall also include any trailer or camper which is designed to provide temporary living quarters for recreational, camping, or seasonal use and is designed to be towed by, or affixed to, a motor vehicle.

“net investment income” applies in that section

The term “net investment income” means the excess of— (i) investment income, over (ii) investment expenses. (B) Investment income

“passive activity” applies in that section

the terms “activity”, “passive activity”, and “materially participate” have the meanings given such terms by section 469. (e) Original issue discount (1) In general The portion of the original issue discount with respect to any debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year. (2) Definitions and special rules For purposes of this subsection— (A) Debt instrument

“personal interest” applies in that section

the term “personal interest” means any interest allowable as a deduction under this chapter other than— (A) interest paid or accrued on indebtedness properly allocable to a trade or business (other than the trade or business of performing services as an employee), (B) any investment interest (within the meaning of subsection (d)), (C) any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer, (D) any qualified residence interest (within the meaning of paragraph (3)), (E) any interest payable under section 6601 on any unpaid portion of the tax imposed by section 2001 for the period during which an extension of time for …

“pre- October 13, 1987 , indebtedness” applies in that section

The term “pre- October 13, 1987 , indebtedness” means— (I) any indebtedness which was incurred on or before October 13, 1987 , and which was secured by a qualified residence on October 13, 1987 , and at all times thereafter before the interest is paid or accrued, or (II) any indebtedness which is secured by the qualified residence and was incurred after October 13, 1987 , to refinance indebtedness described in subclause (I) (or refinanced indebtedness meeting the requirements of this subclause) to the extent (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness …

“property held for investment” applies in that section

The term “property held for investment” shall include— (i) any property which produces income of a type described in section 469(e)(1), and (ii) any interest held by a taxpayer in an activity involving the conduct of a trade or business— (I) which is not a passive activity, and (II) with respect to which the taxpayer does not materially participate. (B) Investment expenses In the case of property described in subparagraph (A)(i), expenses shall be allocated to such property in the same manner as under section 469. (C) Terms For purposes of this paragraph,

“qualified mortgage insurance” applies in that section

The term “qualified mortgage insurance” means— (i) mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and (ii) private mortgage insurance (as defined by section 2 of the Homeowners Protection Act of 1998 ( 12 U.S.C. 4901 ), as in effect on the date of the enactment of this subparagraph).

“qualified passenger vehicle loan interest” applies in that section

the term “qualified passenger vehicle loan interest” means any interest which is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024 , for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. (ii) Exceptions Such term shall not include any amount paid or incurred on any of the following: (I) A loan to finance fleet sales. (II) A loan incurred for the purchase of a commercial vehicle that is not used for personal purposes. (III) Any lease financing. (IV) A loan to finance the purchase of a vehicle with a salvage title.

“qualified residence” applies in that section

The term “qualified residence” means— (I) the principal residence (within the meaning of section 121) of the taxpayer, and (II) 1 other residence of the taxpayer which is selected by the taxpayer for purposes of this subsection for the taxable year and which is used by the taxpayer as a residence (within the meaning of section 280A(d)(1)).

“qualified residence interest” applies in that section

The term “qualified residence interest” means any interest which is paid or accrued during the taxable year on— (i) acquisition indebtedness with respect to any qualified residence of the taxpayer, or (ii) home equity indebtedness with respect to any qualified residence of the taxpayer. For purposes of the preceding sentence, the determination of whether any property is a qualified residence of the taxpayer shall be made as of the time the interest is accrued. (B) Acquisition indebtedness (i) In general

“registration-required obligation” applies in that section

The term “registration-required obligation” means any obligation (including any obligation issued by a governmental entity) other than an obligation which— (i) is issued by a natural person, (ii) is not of a type offered to the public, or (iii) has a maturity (at issue) of not more than 1 year. (B) Authority to include other obligations Clauses (ii) and (iii) of subparagraph (A) shall not apply to any obligation if— (i) such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, and (ii) such obligation is issued after the date on which the regulations referred to in clause (i) take effect. (3) Book entries permitted, etc.

“related foreign person” applies in that section

the term “related foreign person” means any person— (i) who is not a United States person, and (ii) who is related (within the meaning of section 267(b)) to the issuer. (4) Exception This subsection shall not apply to any debt instrument described in section 1272(a)(2)(D) (relating to loans between natural persons).

“applicable limitation amount” applies in that section

the term “applicable limitation amount” means— (i) in the case of any taxable year beginning in calendar year 2025, $40,000, (ii) in the case of any taxable year beginning in calendar year 2026, $40,400, (iii) in the case of any taxable year beginning after calendar year 2026 and before 2030, 101 percent of the dollar amount in effect under this subparagraph for taxable years beginning in the preceding calendar year, and (iv) in the case of any taxable year beginning after calendar year 2029, $10,000.

“compensating use tax” applies in that section

the term “compensating use tax” means, with respect to any item, a tax which— (i) is imposed on the use, storage, or consumption of such item, and (ii) is complementary to a general sales tax, but only if a deduction is allowable under this paragraph with respect to items sold at retail in the taxing jurisdiction which are similar to such item. (F) Special rule for motor vehicles In the case of motor vehicles, if the rate of tax exceeds the general rate, such excess shall be disregarded and the general rate shall be treated as the rate of tax.

“general sales tax” applies in that section

The term “general sales tax” means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of items. (C) Special rules for food, etc. In the case of items of food, clothing, medical supplies, and motor vehicles— (i) the fact that the tax does not apply with respect to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and (ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the general rate of tax shall not be taken into account in determining whether the tax is imposed at one rate.

“modified adjusted gross income” applies in that section

the term “modified adjusted gross income” means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933. (c) Deduction denied in case of certain taxes No deduction shall be allowed for the following taxes: (1) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent the deduction of so much of such taxes as is properly allocable to maintenance or interest charges. (2) Taxes on real property, to the extent that subsection (d) requires such taxes to be treated as imposed on another taxpayer.

“personal property tax” applies in that section

The term “personal property tax” means an ad valorem tax which is imposed on an annual basis in respect of personal property. (2) State or local taxes A State or local tax includes only a tax imposed by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia. (3) Foreign taxes A foreign tax includes only a tax imposed by the authority of a foreign country.

“threshold amount” applies in that section

the term “threshold amount” means— (I) in the case of any taxable year beginning in calendar year 2025, $500,000, (II) in the case of any taxable year beginning in calendar year 2026, $505,000, and (III) in the case of any taxable year beginning after calendar year 2026, 101 percent of the dollar amount in effect under this subparagraph for taxable years beginning in the preceding calendar year. (iii) Limitation on reduction The reduction under clause (i) shall not result in the applicable limitation amount being less than $10,000. (iv) Modified adjusted gross income For purposes of this paragraph,

“deposit” applies in that section

the term “deposit” means any deposit, withdrawable account, or withdrawable or repurchasable share. (5) Election to treat as ordinary loss (A) In general In lieu of any election under paragraph (1), the taxpayer may elect to treat the amount referred to in paragraph (1) for the taxable year as an ordinary loss described in subsection (c)(2) incurred during the taxable year. (B) Limitations (i) Deposit may not be federally insured No election may be made under subparagraph (A) with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under Federal law.

“disaster area” applies in that section

The term “disaster area” means the area so determined to warrant such assistance. (j) Denial of deduction for losses on certain obligations not in registered form (1) In general Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for any loss sustained on any registration-required obligation unless such obligation is in registered form (or the issuance of such obligation was subject to tax under section 4701). (2) Definitions For purposes of this subsection— (A) Registration-required obligation

“Federally 1 declared disaster” applies in that section

The term “Federally 1 declared disaster” means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. (B) Disaster area

“losses from wagering transactions” applies in that section

the term “losses from wagering transactions” includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction. (e) Theft losses For purposes of subsection (a), any loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovers such loss. (f) Capital losses Losses from sales or exchanges of capital assets shall be allowed only to the extent allowed in sections 1211 and 1212.

“personal casualty gain” applies in that section

The term “personal casualty gain” means the recognized gain from any involuntary conversion of property which is described in subsection (c)(3) arising from fire, storm, shipwreck, or other casualty, or from theft. (B) Personal casualty loss

“personal casualty loss” applies in that section

The term “personal casualty loss” means any loss described in subsection (c)(3). For purposes of paragraph (2), the amount of any personal casualty loss shall be determined after the application of paragraph (1). (4) Special rules (A) Personal casualty losses allowable in computing adjusted gross income to the extent of personal casualty gains In any case to which paragraph (2)(A) applies, the deduction for personal casualty losses for any taxable year shall be treated as a deduction allowable in computing adjusted gross income to the extent such losses do not exceed the personal casualty gains for the taxable year.