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legal/us/code/title-26/chapter-79/section-7702.md

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+---
+type: "LegalText"
+title: "26 U.S.C. § 7702"
+description: "Life insurance contract defined"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7702"
+citation: "26 U.S.C. § 7702"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7702"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "8023bea937a7d3297e5d913ce92e1f88482a7c7bb51585be974d0a3ee7fcf806"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "6489ab71853b1cfb6e9dc3bc40000c39323543108b6afadd59e1e8408eb182ad"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7702 - Life insurance contract defined
+
+## Text
+
+(a) General rule For purposes of this title, the term “life insurance contract” means any contract which is a life insurance contract under the applicable law, but only if such contract—
+
+(1) meets the cash value accumulation test of subsection (b), or
+
+(2) (A) meets the guideline premium requirements of subsection (c), and
+
+(B) falls within the cash value corridor of subsection (d).
+
+(b) Cash value accumulation test for subsection (a)(1) (1) In general A contract meets the cash value accumulation test of this subsection if, by the terms of the contract, the cash surrender value of such contract may not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract.
+
+(2) Rules for applying paragraph (1) Determinations under paragraph (1) shall be made—
+
+(A) on the basis of interest at the greater of the applicable accumulation test minimum rate or the rate or rates guaranteed on issuance of the contract,
+
+(B) on the basis of the rules of subparagraph (B)(i) (and, in the case of qualified additional benefits, subparagraph (B)(ii)) of subsection (c)(3), and
+
+(C) by taking into account under subparagraphs (A) and (D) of subsection (e)(1) only current and future death benefits and qualified additional benefits.
+
+(3) Applicable accumulation test minimum rate For purposes of paragraph (2)(A), the term “applicable accumulation test minimum rate” means the lesser of—
+
+(A) an annual effective rate of 4 percent, or
+
+(B) the insurance interest rate (as defined in subsection (f)(11)) in effect at the time the contract is issued.
+
+(c) Guideline premium requirements For purposes of this section—
+
+(1) In general A contract meets the guideline premium requirements of this subsection if the sum of the premiums paid under such contract does not at any time exceed the guideline premium limitation as of such time.
+
+(2) Guideline premium limitation The term “guideline premium limitation” means, as of any date, the greater of—
+
+(A) the guideline single premium, or
+
+(B) the sum of the guideline level premiums to such date.
+
+(3) Guideline single premium (A) In general The term “guideline single premium” means the premium at issue with respect to future benefits under the contract.
+
+(B) Basis on which determination is made The determination under subparagraph (A) shall be based on—
+
+(i) reasonable mortality charges which meet the requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection (f)(10),
+
+(ii) any reasonable charges (other than mortality charges) which (on the basis of the company’s experience, if any, with respect to similar contracts) are reasonably expected to be actually paid, and
+
+(iii) interest at the greater of the applicable guideline premium minimum rate or the rate or rates guaranteed on issuance of the contract.
+
+(C) When determination made Except as provided in subsection (f)(7), the determination under subparagraph (A) shall be made as of the time the contract is issued.
+
+(D) Special rules for subparagraph (B)(ii) (i) Charges not specified in the contract If any charge is not specified in the contract, the amount taken into account under subparagraph (B)(ii) for such charge shall be zero.
+
+(ii) New companies, etc. If any company does not have adequate experience for purposes of the determination under subparagraph (B)(ii), to the extent provided in regulations, such determination shall be made on the basis of the industry-wide experience.
+
+(E) Applicable guideline premium minimum rate For purposes of subparagraph (B)(iii), the term “applicable guideline premium minimum rate” means the applicable accumulation test minimum rate (as defined in subsection (b)(3)) plus 2 percentage points.
+
+(4) Guideline level premium The term “guideline level premium” means the level annual amount, payable over a period not ending before the insured attains age 95, computed on the same basis as the guideline single premium, except that paragraph (3)(B)(iii) shall be applied by substituting “the applicable accumulation test minimum rate” for “the applicable guideline premium minimum rate”.
+
+(d) Cash value corridor for purposes of subsection (a)(2)(B) For purposes of this section—
+
+(1) In general A contract falls within the cash value corridor of this subsection if the death benefit under the contract at any time is not less than the applicable percentage of the cash surrender value.
+
+(2) Applicable percentage In the case of an insured with an attained age as of the beginning of the contract year of:The applicable percentage shall decrease by a ratable portion for each full year: More than:But notmore than:From:To: 040 250250 4045 250215 4550 215185 5055 185150 5560 150130 6065 130120 6570 120115 7075 115105 7590 105105 9095 105100.
+
+(e) Computational rules (1) In general For purposes of this section (other than subsection (d))—
+
+(A) the death benefit (and any qualified additional benefit) shall be deemed not to increase,
+
+(B) the maturity date, including the date on which any benefit described in subparagraph (C) is payable, shall be deemed to be no earlier than the day on which the insured attains age 95, and no later than the day on which the insured attains age 100,
+
+(C) the death benefits shall be deemed to be provided until the maturity date determined by taking into account subparagraph (B), and
+
+(D) the amount of any endowment benefit (or sum of endowment benefits, including any cash surrender value on the maturity date determined by taking into account subparagraph (B)) shall be deemed not to exceed the least amount payable as a death benefit at any time under the contract.
+
+(2) Limited increases in death benefit permitted Notwithstanding paragraph (1)(A)—
+
+(A) for purposes of computing the guideline level premium, an increase in the death benefit which is provided in the contract may be taken into account but only to the extent necessary to prevent a decrease in the excess of the death benefit over the cash surrender value of the contract,
+
+(B) for purposes of the cash value accumulation test, the increase described in subparagraph (A) may be taken into account if the contract will meet such test at all times assuming that the net level reserve (determined as if level annual premiums were paid for the contract over a period not ending before the insured attains age 95) is substituted for the net single premium, and
+
+(C) for purposes of the cash value accumulation test, the death benefit increases may be taken into account if the contract—
+
+(i) has an initial death benefit of $5,000 or less and a maximum death benefit of $25,000 or less,
+
+(ii) provides for a fixed predetermined annual increase not to exceed 10 percent of the initial death benefit or 8 percent of the death benefit at the end of the preceding year, and
+
+(iii) was purchased to cover payment of burial expenses or in connection with prearranged funeral expenses.
+
+For purposes of subparagraph (C), the initial death benefit of a contract shall be determined by treating all contracts issued to the same contract owner as 1 contract.
+
+(f) Other definitions and special rules For purposes of this section—
+
+(1) Premiums paid (A) In general The term “premiums paid” means the premiums paid under the contract less amounts (other than amounts includible in gross income) to which section 72(e) applies and less any excess premiums with respect to which there is a distribution described in subparagraph (B) or (E) of paragraph (7) and any other amounts received with respect to the contract which are specified in regulations.
+
+(B) Treatment of certain premiums returned to policyholder If, in order to comply with the requirements of subsection (a)(2)(A), any portion of any premium paid during any contract year is returned by the insurance company (with interest) within 60 days after the end of a contract year, the amount so returned (excluding interest) shall be deemed to reduce the sum of the premiums paid under the contract during such year.
+
+(C) Interest returned includible in gross income Notwithstanding the provisions of section 72(e), the amount of any interest returned as provided in subparagraph (B) shall be includible in the gross income of the recipient.
+
+(2) Cash values (A) Cash surrender value The cash surrender value of any contract shall be its cash value determined without regard to any surrender charge, policy loan, or reasonable termination dividends.
+
+(B) Net surrender value The net surrender value of any contract shall be determined with regard to surrender charges but without regard to any policy loan.
+
+(3) Death benefit The term “death benefit” means the amount payable by reason of the death of the insured (determined without regard to any qualified additional benefits).
+
+(4) Future benefits The term “future benefits” means death benefits and endowment benefits.
+
+(5) Qualified additional benefits (A) In general The term “qualified additional benefits” means any—
+
+(i) guaranteed insurability,
+
+(ii) accidental death or disability benefit,
+
+(iii) family term coverage,
+
+(iv) disability waiver benefit, or
+
+(v) other benefit prescribed under regulations.
+
+(B) Treatment of qualified additional benefits For purposes of this section, qualified additional benefits shall not be treated as future benefits under the contract, but the charges for such benefits shall be treated as future benefits.
+
+(C) Treatment of other additional benefits In the case of any additional benefit which is not a qualified additional benefit—
+
+(i) such benefit shall not be treated as a future benefit, and
+
+(ii) any charge for such benefit which is not prefunded shall not be treated as a premium.
+
+(6) Premium payments not disqualifying contract The payment of a premium which would result in the sum of the premiums paid exceeding the guideline premium limitation shall be disregarded for purposes of subsection (a)(2) if the amount of such premium does not exceed the amount necessary to prevent the termination of the contract on or before the end of the contract year (but only if the contract will have no cash surrender value at the end of such extension period).
+
+(7) Adjustments (A) In general If there is a change in the benefits under (or in other terms of) the contract which was not reflected in any previous determination or adjustment made under this section, there shall be proper adjustments in future determinations made under this section.
+
+(B) Rule for certain changes during first 15 years If—
+
+(i) a change described in subparagraph (A) reduces benefits under the contract,
+
+(ii) the change occurs during the 15-year period beginning on the issue date of the contract, and
+
+(iii) a cash distribution is made to the policyholder as a result of such change,
+
+section 72 (other than subsection (e)(5) thereof) shall apply to such cash distribution to the extent it does not exceed the recapture ceiling determined under subparagraph (C) or (D) (whichever applies).
+
+(C) Recapture ceiling where change occurs during first 5 years If the change referred to in subparagraph (B)(ii) occurs during the 5-year period beginning on the issue date of the contract, the recapture ceiling is—
+
+(i) in the case of a contract to which subsection (a)(1) applies, the excess of—
+
+(I) the cash surrender value of the contract, immediately before the reduction, over
+
+(II) the net single premium (determined under subsection (b)), immediately after the reduction, or
+
+(ii) in the case of a contract to which subsection (a)(2) applies, the greater of—
+
+(I) the excess of the aggregate premiums paid under the contract, immediately before the reduction, over the guideline premium limitation for the contract (determined under subsection (c)(2), taking into account the adjustment described in subparagraph (A)), or
+
+(II) the excess of the cash surrender value of the contract, immediately before the reduction, over the cash value corridor of subsection (d) (determined immediately after the reduction).
+
+(D) Recapture ceiling where change occurs after 5th year and before 16th year If the change referred to in subparagraph (B) occurs after the 5-year period referred to under subparagraph (C), the recapture ceiling is the excess of the cash surrender value of the contract, immediately before the reduction, over the cash value corridor of subsection (d) (determined immediately after the reduction and whether or not subsection (d) applies to the contract).
+
+(E) Treatment of certain distributions made in anticipation of benefit reductions Under regulations prescribed by the Secretary, subparagraph (B) shall apply also to any distribution made in anticipation of a reduction in benefits under the contract. For purposes of the preceding sentence, appropriate adjustments shall be made in the provisions of subparagraphs (C) and (D); and any distribution which reduces the cash surrender value of a contract and which is made within 2 years before a reduction in benefits under the contract shall be treated as made in anticipation of such reduction.
+
+(8) Correction of errors If the taxpayer establishes to the satisfaction of the Secretary that—
+
+(A) the requirements described in subsection (a) for any contract year were not satisfied due to reasonable error, and
+
+(B) reasonable steps are being taken to remedy the error,
+
+the Secretary may waive the failure to satisfy such requirements.
+
+(9) Special rule for variable life insurance contracts In the case of any contract which is a variable contract (as defined in section 817), the determination of whether such contract meets the requirements of subsection (a) shall be made whenever the death benefits under such contract change but not less frequently than once during each 12-month period.
+
+(10) Prevailing commissioners’ standard tables For purposes of subsection (c)(3)(B)(i), the term “prevailing commissioners’ standard tables” means the most recent commissioners’ standard tables prescribed by the National Association of Insurance Commissioners which are permitted to be used in computing reserves for that type of contract under the insurance laws of at least 26 States when the contract was issued. If the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph referred to as the “year of change”) are different from the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year, the issuer may use the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year with respect to any contract issued after the change and before the close of the 3-year period beginning on the first day of the year of change.
+
+(11) Insurance interest rate For purposes of this section—
+
+(A) In general The term “insurance interest rate” means, with respect to any contract issued in any calendar year, the lesser of—
+
+(i) the section 7702 valuation interest rate for such calendar year (or, if such calendar year is not an adjustment year, the most recent adjustment year), or
+
+(ii) the section 7702 applicable Federal interest rate for such calendar year (or, if such calendar year is not an adjustment year, the most recent adjustment year).
+
+(B) Section 7702 valuation interest rate The term “section 7702 valuation interest rate” means, with respect to any adjustment year, the prescribed U.S. valuation interest rate for life insurance with guaranteed durations of more than 20 years (as defined in the National Association of Insurance Commissioners’ Standard Valuation Law) as effective in the calendar year immediately preceding such adjustment year.
+
+(C) Section 7702 applicable Federal interest rate The term “section 7702 applicable Federal interest rate” means, with respect to any adjustment year, the average (rounded to the nearest whole percentage point) of the applicable Federal mid-term rates (as defined in section 1274(d) but based on annual compounding) effective as of the beginning of each of the calendar months in the most recent 60-month period ending before the second calendar year prior to such adjustment year.
+
+(D) Adjustment year The term “adjustment year” means the calendar year following any calendar year that includes the effective date of a change in the prescribed U.S. valuation interest rate for life insurance with guaranteed durations of more than 20 years (as defined in the National Association of Insurance Commissioners’ Standard Valuation Law).
+
+(E) Transition rule Notwithstanding subparagraph (A), the insurance interest rate shall be 2 percent in the case of any contract which is issued during the period that—
+
+(i) begins on January 1, 2021, and
+
+(ii) ends immediately before the beginning of the first adjustment year that beings 11 So in original. Probably should be “begins”. after December 31, 2021.
+
+(g) Treatment of contracts which do not meet subsection (a) test (1) Income inclusion (A) In general If at any time any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), the income on the contract for any taxable year of the policyholder shall be treated as ordinary income received or accrued by the policyholder during such year.
+
+(B) Income on the contract For purposes of this paragraph, the term “income on the contract” means, with respect to any taxable year of the policyholder, the excess of—
+
+(i) the sum of—
+
+(I) the increase in the net surrender value of the contract during the taxable year, and
+
+(II) the cost of life insurance protection provided under the contract during the taxable year, over
+
+(ii) the premiums paid (as defined in subsection (f)(1)) under the contract during the taxable year.
+
+(C) Contracts which cease to meet definition If, during any taxable year of the policyholder, a contract which is a life insurance contract under the applicable law ceases to meet the definition of life insurance contract under subsection (a), the income on the contract for all prior taxable years shall be treated as received or accrued during the taxable year in which such cessation occurs.
+
+(D) Cost of life insurance protection For purposes of this paragraph, the cost of life insurance protection provided under the contract shall be the lesser of—
+
+(i) the cost of individual insurance on the life of the insured as determined on the basis of uniform premiums (computed on the basis of 5-year age brackets) prescribed by the Secretary by regulations, or
+
+(ii) the mortality charge (if any) stated in the contract.
+
+(2) Treatment of amount paid on death of insured If any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), the excess of the amount paid by the reason of the death of the insured over the net surrender value of the contract shall be deemed to be paid under a life insurance contract for purposes of section 101 and subtitle B.
+
+(3) Contract continues to be treated as insurance contract If any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), such contract shall, notwithstanding such failure, be treated as an insurance contract for purposes of this title.
+
+(h) Endowment contracts receive same treatment (1) In general References in subsections (a) and (g) to a life insurance contract shall be treated as including references to a contract which is an endowment contract under the applicable law.
+
+(2) Definition of endowment contract For purposes of this title (other than paragraph (1)), the term “endowment contract” means a contract which is an endowment contract under the applicable law and which meets the requirements of subsection (a).
+
+(i) Transitional rule for certain 20-pay contracts (1) In general In the case of a qualified 20-pay contract, this section shall be applied by substituting “3 percent” for “4 percent” in subsection (b)(2).
+
+(2) Qualified 20-pay contract For purposes of paragraph (1), the term “qualified 20-pay contract” means any contract which—
+
+(A) requires at least 20 nondecreasing annual premium payments, and
+
+(B) is issued pursuant to an existing plan of insurance.
+
+(3) Existing plan of insurance For purposes of this subsection, the term “existing plan of insurance” means, with respect to any contract, any plan of insurance which was filed by the company issuing such contract in 1 or more States before September 28, 1983, and is on file in the appropriate State for such contract.
+
+(j) Certain church self-funded death benefit plans treated as life insurance (1) In general In determining whether any plan or arrangement described in paragraph (2) is a life insurance contract, the requirement of subsection (a) that the contract be a life insurance contract under applicable law shall not apply.
+
+(2) Description For purposes of this subsection, a plan or arrangement is described in this paragraph if—
+
+(A) such plan or arrangement provides for the payment of benefits by reason of the death of the individuals covered under such plan or arrangement, and
+
+(B) such plan or arrangement is provided by a church for the benefit of its employees and their beneficiaries, directly or through an organization described in section 414(e)(3)(A) or an organization described in section 414(e)(3)(B)(ii).
+
+(3) Definitions For purposes of this subsection—
+
+(A) Church The term “church” means a church or a convention or association of churches.
+
+(B) Employee The term “employee” includes an employee described in section 414(e)(3)(B).
+
+(k) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
+
+(Added Pub. L. 98–369, div. A, title II, § 221(a), July 18, 1984, 98 Stat. 767; amended Pub. L. 99–514, title XVIII, § 1825(a)–(c), Oct. 22, 1986, 100 Stat. 2846–2848; Pub. L. 100–647, title V, § 5011(a), (b), title VI, § 6078(a), Nov. 10, 1988, 102 Stat. 3660, 3661, 3709; Pub. L. 115–97, title I, § 13517(a)(4), Dec. 22, 2017, 131 Stat. 2146; Pub. L. 116–260, div. EE, title II, § 205(a)–(d), Dec. 27, 2020, 134 Stat. 3058.)
+
+## Notes
+
+Editorial Notes
+
+Amendments2020—Subsec. (b)(2)(A). Pub. L. 116–260, § 205(a)(1), substituted “the applicable accumulation test minimum rate” for “an annual effective rate of 4 percent”. Subsec. (b)(3). Pub. L. 116–260, § 205(a)(2), added par. (3). Subsec. (c)(3)(B)(iii). Pub. L. 116–260, § 205(b)(1), substituted “the applicable guideline premium minimum rate” for “an annual effective rate of 6 percent”. Subsec. (c)(3)(E). Pub. L. 116–260, § 205(b)(2), added subpar. (E). Subsec. (c)(4). Pub. L. 116–260, § 205(c), substituted “the applicable accumulation test minimum rate” for “4 percent” and “the applicable guideline premium minimum rate” for “6 percent”. Subsec. (f)(11). Pub. L. 116–260, § 205(d), added par. (11). 2017—Subsec. (c)(3)(B)(i). Pub. L. 115–97, § 13517(a)(4)(A), added cl. (i) and struck out former cl. (i) which read as follows: “reasonable mortality charges which meet the requirements (if any) prescribed in regulations and which (except as provided in regulations) do not exceed the mortality charges specified in the prevailing commissioners’ standard tables (as defined in section 807(d)(5)) as of the time the contract is issued,”. Subsec. (f)(10). Pub. L. 115–97, § 13517(a)(4)(B), added par. (10). 1988—Subsec. (c)(3)(B)(i), (ii). Pub. L. 100–647, § 5011(a), added cls. (i) and (ii) and struck out former cls. (i) and (ii) which read as follows: “(i) the mortality charges specified in the contract (or, if none is specified, the mortality charges used in determining the statutory reserves for such contract), “(ii) any charges (not taken into account under clause (i)) specified in the contract (the amount of any charge not so specified shall be treated as zero), and”. Subsec. (c)(3)(D). Pub. L. 100–647, § 5011(b), added subpar. (D). Subsecs. (j), (k). Pub. L. 100–647, § 6078(a), added subsec. (j) and redesignated former subsec. (j) as (k). 1986—Subsec. (b)(2)(C). Pub. L. 99–514, § 1825(a)(2), substituted “subparagraphs (A) and (D)” for “subparagraphs (A) and (C)”. Subsec. (e)(1). Pub. L. 99–514, § 1825(a)(3), inserted “(other than subsection (d))” after “section”. Subsec. (e)(1)(B). Pub. L. 99–514, § 1825(a)(1)(A), substituted “shall be deemed to be no earlier than” for “shall be no earlier than”. Subsec. (e)(1)(C). Pub. L. 99–514, § 1821(a)(1)(C), added subpar. (C). Former subpar. (C) redesignated (D). Subsec. (e)(1)(D). Pub. L. 99–514, § 1821(a)(1)(C), (D), redesignated subpar. (C) as (D) and substituted “the maturity date determined by taking into account subparagraph (B)” for “the maturity date described in subparagraph (B)”. Subsec. (e)(2)(C). Pub. L. 99–514, § 1825(a)(4), added subpar. (C). Subsec. (f)(1)(A). Pub. L. 99–514, § 1825(b)(2), substituted “less any excess premiums with respect to which there is a distribution described in subparagraph (B) or (E) of paragraph (7) and any other amounts received” for “less any other amounts received”. Subsec. (f)(7). Pub. L. 99–514, § 1825(b)(1), amended par. (7) generally. Prior to amendment, par. (7)(A), in general, read as follows: “In the event of a change in the future benefits or any qualified additional benefit (or in any other terms) under the contract which was not reflected in any previous determination made under this section, under regulations prescribed by the Secretary, there shall be proper adjustments in future determinations made under this section.”, and par. (7)(B), certain changes treated as exchange, read as follows: “In the case of any change which reduces the future benefits under the contract, such change shall be treated as an exchange of the contract for another contract.” Subsec. (g)(1)(B)(ii). Pub. L. 99–514, § 1825(c), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the amount of premiums paid under the contract during the taxable year reduced by any policyholder dividends received during such taxable year.”
+
+Statutory Notes and Related Subsidiaries
+
+Effective Date of 2020 AmendmentPub. L. 116–260, div. EE, title II, § 205(e), Dec. 27, 2020, 134 Stat. 3059, provided that: “The amendments made by this section [amending this section] shall apply to contracts issued after December 31, 2020.”
+
+Effective Date of 2017 AmendmentAmendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, with transition rule and transition relief, see section 13517(c) of Pub. L. 115–97, set out as a note under section 807 of this title.
+
+Effective Date of 1988 AmendmentPub. L. 100–647, title V, § 5011(d), Nov. 10, 1988, 102 Stat. 3661, provided that: “The amendments made by this section [amending this section] shall apply to contracts entered into on or after October 21, 1988.” Pub. L. 100–647, title VI, § 6078(b), Nov. 10, 1988, 102 Stat. 3709, provided that: “The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendment made by section 221(a) of the Tax Reform Act of 1984 [Pub. L. 98–369, which enacted this section].”
+
+Effective Date of 1986 AmendmentPub. L. 99–514, title XVIII, § 1825(a)(4), Oct. 22, 1986, 100 Stat. 2846, as amended by Pub. L. 100–647, title I, § 1018(j), Nov. 10, 1988, 102 Stat. 3583, provided that the amendment made by that section is effective with respect to contracts entered into after Oct. 22, 1986. Amendment by section 1825(a)(1)–(3), (b), (c) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
+
+Effective DatePub. L. 98–369, div. A, title II, § 221(d), July 18, 1984, 98 Stat. 772, as amended by Pub. L. 99–514, § 2, title XVIII, §§ 1825(e), 1899A(69), Oct. 22, 1986, 100 Stat. 2095, 2848, 2962, provided that: “(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending section 101 of this title and provisions set out as a note under section 101 of this title] shall apply to contracts issued after December 31, 1984, in taxable years ending after such date. “(2) Special rule for certain contracts issued after june 30, 1984.—“(A) General rule.—Except as otherwise provided in this paragraph, the amendments made by this section shall apply also to any contract issued after June 30, 1984, which provides an increasing death benefit and has premium funding more rapid than 10-year level premium payments. “(B) Exception for certain contracts.—Subparagraph (A) shall not apply to any contract if—“(i) such contract (whether or not a flexible premium contract) would meet the requirements of section 101(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], “(ii) such contract is not a flexible premium life insurance contract (within the meaning of section 101(f) of such Code) and would meet the requirements of section 7702 of such Code determined by—“(I) substituting ‘3 percent’ for ‘4 percent’ in section 7702(b)(2) of such Code, and “(II) treating subparagraph (B) of section 7702(e)(1) of such Code as if it read as follows: ‘the maturity date shall be the latest maturity date permitted under the contract, but not less than 20 years after the date of issue or (if earlier) age 95’, or “(iii) under such contract—“(I) the premiums (including any policy fees) will be adjusted from time-to-time to reflect the level amount necessary (but not less than zero) at the time of such adjustment to provide a level death benefit assuming interest crediting and an annual effective interest rate of not less than 3 percent, or “(II) at the option of the insured, in lieu of an adjustment under subclause (I) there will be a comparable adjustment in the amount of the death benefit. “(C) Certain contracts issued before october 1, 1984.—“(i) In general.—Subparagraph (A) shall be applied by substituting ‘September 30, 1984’ for ‘June 30, 1984’ in the case of a contract—“(I) which would meet the requirements of section 7702 of such Code if ‘3 percent’ were substituted for ‘4 percent’ in section 7702(b)(2) of such Code, and the rate or rates guaranteed on issuance of the contract were determined without regard to any mortality charges and any initial excess interest guarantees, and “(II) the cash surrender value of which does not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract. “(ii) Definitions.—For purposes of clause (i)—“(I) In general.—Except as provided in subclause (II), terms used in clause (i) shall have the same meanings as when used in section 7702 of such Code. “(II) Net single premium.—The term ‘net single premium’ shall be determined by substituting ‘3 percent’ for ‘4 percent’ in section 7702(b)(2) of such Code, by using the 1958 standard ordinary mortality and morbidity tables of the National Association of Insurance Commissioners, and by assuming a level death benefit. “(3) Transitional rule for certain existing plans of insurance.—A plan of insurance on file in 1 or more States before September 28, 1983, shall be treated for purposes of section 7702(i)(3) of such Code as a plan of insurance on file in 1 or more States before September 28, 1983, without regard to whether such plan of insurance is modified after September 28, 1983, to permit the crediting of excess interest or similar amounts annually and not monthly under contracts issued pursuant to such plan of insurance. “(4) Extension of flexible premium contract provisions.—The amendments made by subsection (b) [amending section 101 of this title and provisions set out as a note under section 101 of this title] shall take effect on January 1, 1984. “(5) Special rule for master contract.—For purposes of this subsection, in the case of a master contract, the date taken into account with respect to any insured shall be the first date on which such insured is covered under such contract.”
+
+Interim Rules; Regulations; Standards Before Regulations Take EffectPub. L. 100–647, title V, § 5011(c), Nov. 10, 1988, 102 Stat. 3661, provided that the Secretary of the Treasury would issue regulations under subsec. (c)(3)(B)(i) of this section and provided for a standard for contracts issues before the effective date of those regulations.
+
+Plan Amendments Not Required Until January 1, 1989For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
+
+Treatment of Flexible Premium Contracts Issued During 1984 Which Meet New RequirementsPub. L. 98–369, div. A, title II, § 221(b)(3), as added by Pub. L. 99–514, title XVIII, § 1825(d), Oct. 22, 1986, 100 Stat. 2848, provided that: “Any flexible premium contract issued during 1984 which meets the requirements of section 7702 of the Internal Revenue Code of 1954 [now 1986] (as added by this section) shall be treated as meeting the requirements of section 101(f) of such Code.”

legal/us/code/title-26/chapter-79/section-7702a.md

@@ -0,0 +1,125 @@
+---
+type: "LegalText"
+title: "26 U.S.C. § 7702A"
+description: "Modified endowment contract defined"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7702A"
+citation: "26 U.S.C. § 7702A"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7702A"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "5941464c7aa7249df28d4565793fbf58e23a63a0ab9f051f018dca5fbe3554d4"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "652b1b6d144667ef2e0f441b992fb6c89add9c26b500212bd9fbb772591853e7"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7702A - Modified endowment contract defined
+
+## Text
+
+(a) General rule For purposes of section 72, the term “modified endowment contract” means any contract meeting the requirements of section 7702—
+
+(1) which—
+
+(A) is entered into on or after June 21, 1988, and
+
+(B) fails to meet the 7-pay test of subsection (b), or
+
+(2) which is received in exchange for a contract described in paragraph (1) or this paragraph.
+
+(b) 7-pay test For purposes of subsection (a), a contract fails to meet the 7-pay test of this subsection if the accumulated amount paid under the contract at any time during the 1st 7 contract years exceeds the sum of the net level premiums which would have been paid on or before such time if the contract provided for paid-up future benefits after the payment of 7 level annual premiums.
+
+(c) Computational rules (1) In general Except as provided in this subsection, the determination under subsection (b) of the 7 level annual premiums shall be made—
+
+(A) as of the time the contract is issued, and
+
+(B) by applying the rules of section 7702(b)(2) and of section 7702(e) (other than paragraph (2)(C) thereof), except that the death benefit provided for the 1st contract year shall be deemed to be provided until the maturity date without regard to any scheduled reduction after the 1st 7 contract years.
+
+(2) Reduction in benefits during 1st 7 years (A) In general If there is a reduction in benefits under the contract within the 1st 7 contract years, this section shall be applied as if the contract had originally been issued at the reduced benefit level.
+
+(B) Reductions attributable to nonpayment of premiums Any reduction in benefits attributable to the nonpayment of premiums due under the contract shall not be taken into account under subparagraph (A) if the benefits are reinstated within 90 days after the reduction in such benefits.
+
+(3) Treatment of material changes (A) In general If there is a material change in the benefits under (or in other terms of) the contract which was not reflected in any previous determination under this section, for purposes of this section—
+
+(i) such contract shall be treated as a new contract entered into on the day on which such material change takes effect, and
+
+(ii) appropriate adjustments shall be made in determining whether such contract meets the 7-pay test of subsection (b) to take into account the cash surrender value under the contract.
+
+(B) Treatment of certain benefit increases For purposes of subparagraph (A), the term “material change” includes any increase in the death benefit under the contract or any increase in, or addition of, a qualified additional benefit under the contract. Such term shall not include—
+
+(i) any increase which is attributable to the payment of premiums necessary to fund the lowest level of the death benefit and qualified additional benefits payable in the 1st 7 contract years (determined after taking into account death benefit increases described in subparagraph (A) or (B) of section 7702(e)(2)) or to crediting of interest or other earnings (including policyholder dividends) in respect of such premiums, and
+
+(ii) to the extent provided in regulations, any cost-of-living increase based on an established broad-based index if such increase is funded ratably over the remaining period during which premiums are required to be paid under the contract.
+
+(4) Special rule for contracts with death benefits of $10,000 or less In the case of a contract—
+
+(A) which provides an initial death benefit of $10,000 or less, and
+
+(B) which requires at least 7 nondecreasing annual premium payments,
+
+each of the 7 level annual premiums determined under subsection (b) (without regard to this paragraph) shall be increased by $75. For purposes of this paragraph, the contract involved and all contracts previously issued to the same policyholder by the same company shall be treated as one contract.
+
+(5) Regulatory authority for certain collection expenses The Secretary may by regulations prescribe rules for taking into account expenses solely attributable to the collection of premiums paid more frequently than annually.
+
+(6) Treatment of certain contracts with more than one insured If—
+
+(A) a contract provides a death benefit which is payable only upon the death of 1 insured following (or occurring simultaneously with) the death of another insured, and
+
+(B) there is a reduction in such death benefit below the lowest level of such death benefit provided under the contract during the 1st 7 contract years,
+
+this section shall be applied as if the contract had originally been issued at the reduced benefit level.
+
+(d) Distributions affected If a contract fails to meet the 7-pay test of subsection (b), such contract shall be treated as failing to meet such requirements only in the case of—
+
+(1) distributions during the contract year in which the failure takes effect and during any subsequent contract year, and
+
+(2) under regulations prescribed by the Secretary, distributions (not described in paragraph (1)) in anticipation of such failure.
+
+For purposes of the preceding sentence, any distribution which is made within 2 years before the failure to meet the 7-pay test shall be treated as made in anticipation of such failure.
+
+(e) Definitions For purposes of this section—
+
+(1) Amount paid (A) In general The term “amount paid” means—
+
+(i) the premiums paid under the contract, reduced by
+
+(ii) amounts to which section 72(e) applies (determined without regard to paragraph (4)(A) thereof) but not including amounts includible in gross income.
+
+(B) Treatment of certain premiums returned If, in order to comply with the requirements of subsection (b), any portion of any premium paid during any contract year is returned by the insurance company (with interest) within 60 days after the end of such contract year, the amount so returned (excluding interest) shall be deemed to reduce the sum of the premiums paid under the contract during such contract year.
+
+(C) Interest returned includible in gross income Notwithstanding the provisions of section 72(e), the amount of any interest returned as provided in subparagraph (B) shall be includible in the gross income of the recipient.
+
+(2) Contract year The term “contract year” means the 12-month period beginning with the 1st month for which the contract is in effect, and each 12-month period beginning with the corresponding month in subsequent calendar years.
+
+(3) Other terms Except as otherwise provided in this section, terms used in this section shall have the same meaning as when used in section 7702.
+
+(Added Pub. L. 100–647, title V, § 5012(c)(1), Nov. 10, 1988, 102 Stat. 3662; amended Pub. L. 101–239, title VII, §§ 7647(a), 7815(a)(1), (4), Dec. 19, 1989, 103 Stat. 2382, 2414; Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(1), (2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645; Pub. L. 107–147, title IV, § 416(f), Mar. 9, 2002, 116 Stat. 55.)
+
+## Notes
+
+Editorial Notes
+
+Amendments2002—Subsec. (c)(3)(A)(ii). Pub. L. 107–147 repealed Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(2)]. See 2000 Amendment note below. 2000—Subsec. (a)(2). Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(1)], inserted “or this paragraph” before period at end. Subsec. (c)(3)(A)(ii). Pub. L. 106–554, § 1(a)(7) [title III, § 318(a)(2)], which substituted “under the old contract” for “under the contract”, was repealed by Pub. L. 107–147. See Construction of 2002 Amendment note below. 1989—Subsec. (c)(3)(B). Pub. L. 101–239, § 7815(a)(1), substituted “benefit increases” for “increases in future benefits” in heading and amended text generally. Prior to amendment, text read as follows: “For purposes of subparagraph (A), the term ‘material change’ includes any increase in future benefits under the contract. Such term shall not include— “(i) any increase which is attributable to the payment of premiums necessary to fund the lowest level of future benefits payable in the 1st 7 contract years (determined after taking into account death benefit increases described in subparagraph (A) or (B) of section 7702(e)(2)) or to crediting of interest or other earnings (including policyholder dividends) in respect of such premiums, and “(ii) to the extent provided in regulations, any cost-of-living increase based on an established broad-based index if such increase is funded ratably over the remaining life of the the contract.” Subsec. (c)(4). Pub. L. 101–239, § 7815(a)(4), substituted “of $10,000 or less” for “under $10,000” in heading and “the same policyholder” for “the same insurer” in concluding provisions. Subsec. (c)(6). Pub. L. 101–239, § 7647(a), added par. (6).
+
+Statutory Notes and Related Subsidiaries
+
+Effective Date of 2000 AmendmentPub. L. 106–554, § 1(a)(7) [title III, § 318(a)(3)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645, provided that: “The amendments made by this subsection [amending this section] shall take effect as if included in the amendments made by section 5012 of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100–647].”
+
+Effective Date of 1989 AmendmentPub. L. 101–239, title VII, § 7647(b), Dec. 19, 1989, 103 Stat. 2383, provided that: “The amendment made by subsection (a) [amending this section] shall apply to contracts entered into on or after September 14, 1989.” Amendment by section 7815(a)(1), (4) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.
+
+Effective DatePub. L. 100–647, title V, § 5012(e), Nov. 10, 1988, 102 Stat. 3665, as amended by Pub. L. 101–239, title VII, § 7815(a)(2), Dec. 19, 1989, 103 Stat. 2414, provided that: “(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending sections 26 and 72 of this title] shall apply to contracts entered into on or after June 21, 1988. “(2) Special rule where death benefit increases by more than $150,000.—If the death benefit under the contract increases by more than $150,000 over the death benefit under the contract in effect on October 20, 1988, the rules of section 7702A(c)(3) of the 1986 Code (as added by this section) shall apply in determining whether such contract is issued on or after June 21, 1988. The preceding sentence shall not apply in the case of a contract which, as of June 21, 1988, required at least 7 level annual premium payments and under which the policyholder makes at least 7 level annual premium payments. “(3) Certain other material changes taken into account.—A contract entered into before June 21, 1988, shall be treated as entered into after such date if—“(A) on or after June 21, 1988, the death benefit under the contract is increased (or a qualified additional benefit is increased or added) and before June 21, 1988, the owner of the contract did not have a unilateral right under the contract to obtain such increase or addition without providing additional evidence of insurability, or “(B) the contract is converted after June 20, 1988, from a term life insurance contract to a life insurance contract providing coverage other than term life insurance coverage without regard to any right of the owner of the contract to such conversion. “(4) Certain exchanges permitted.—In the case of a modified endowment contract which—“(A) required at least 7 annual level premium payments, “(B) is entered into after June 20, 1988, and before the date of the enactment of this Act [Nov. 10, 1988], and “(C) is exchanged within 3 months after such date of enactment for a life insurance contract which meets the requirements of section 7702A(b), the contract which is received in exchange for such contract shall not be treated as a modified endowment contract if the taxpayer elects, notwithstanding section 1035 of the 1986 Code, to recognize gain on such exchange. “(5) Special rule for annuity contracts.—In the case of annuity contracts, the amendments made by subsection (d) [amending section 72 of this title] shall apply to contracts entered into after October 21, 1988.”
+
+Construction of 2002 AmendmentPub. L. 107–147, title IV, § 416(f), Mar. 9, 2002, 116 Stat. 55, provided that: “Paragraph (2) of section 318(a) of the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by section 1(a)(7) of Pub. L. 106–554](114 Stat. 2763A–645) [amending this section] is repealed, and clause (ii) of section 7702A(c)(3)(A) shall read and be applied as if the amendment made by such paragraph had not been enacted.”

legal/us/code/title-26/chapter-79/section-7702b.md

@@ -0,0 +1,287 @@
+---
+type: "LegalText"
+title: "26 U.S.C. § 7702B"
+description: "Treatment of qualified long-term care insurance"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7702B"
+citation: "26 U.S.C. § 7702B"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7702B"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "20a52fd0a83e385057935fd0615b67990553e645f36b95386d677e16bdf4006d"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "bba6d7330dc8ea285ee7cfdcd59c44c1f5ee09c179da152524208219f627061d"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7702B - Treatment of qualified long-term care insurance
+
+## Text
+
+(a) In general For purposes of this title—
+
+(1) a qualified long-term care insurance contract shall be treated as an accident and health insurance contract,
+
+(2) amounts (other than policyholder dividends, as defined in section 808, or premium refunds) received under a qualified long-term care insurance contract shall be treated as amounts received for personal injuries and sickness and shall be treated as reimbursement for expenses actually incurred for medical care (as defined in section 213(d)),
+
+(3) any plan of an employer providing coverage under a qualified long-term care insurance contract shall be treated as an accident and health plan with respect to such coverage,
+
+(4) except as provided in subsection (e)(3), amounts paid for a qualified long-term care insurance contract providing the benefits described in subsection (b)(2)(A) shall be treated as payments made for insurance for purposes of section 213(d)(1)(D), and
+
+(5) a qualified long-term care insurance contract shall be treated as a guaranteed renewable contract subject to the rules of section 816(e).
+
+(b) Qualified long-term care insurance contract For purposes of this title—
+
+(1) In general The term “qualified long-term care insurance contract” means any insurance contract if—
+
+(A) the only insurance protection provided under such contract is coverage of qualified long-term care services,
+
+(B) such contract does not pay or reimburse expenses incurred for services or items to the extent that such expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount,
+
+(C) such contract is guaranteed renewable,
+
+(D) such contract does not provide for a cash surrender value or other money that can be—
+
+(i) paid, assigned, or pledged as collateral for a loan, or
+
+(ii) borrowed,
+
+other than as provided in subparagraph (E) or paragraph (2)(C),
+
+(E) all refunds of premiums, and all policyholder dividends or similar amounts, under such contract are to be applied as a reduction in future premiums or to increase future benefits, and
+
+(F) such contract meets the requirements of subsection (g).
+
+(2) Special rules (A) Per diem, etc. payments permitted A contract shall not fail to be described in subparagraph (A) or (B) of paragraph (1) by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate.
+
+(B) Special rules relating to medicare (i) Paragraph (1)(B) shall not apply to expenses which are reimbursable under title XVIII of the Social Security Act only as a secondary payor.
+
+(ii) No provision of law shall be construed or applied so as to prohibit the offering of a qualified long-term care insurance contract on the basis that the contract coordinates its benefits with those provided under such title.
+
+(C) Refunds of premiums Paragraph (1)(E) shall not apply to any refund on the death of the insured, or on a complete surrender or cancellation of the contract, which cannot exceed the aggregate premiums paid under the contract. Any refund on a complete surrender or cancellation of the contract shall be includible in gross income to the extent that any deduction or exclusion was allowable with respect to the premiums.
+
+(c) Qualified long-term care services For purposes of this section—
+
+(1) In general The term “qualified long-term care services” means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which—
+
+(A) are required by a chronically ill individual, and
+
+(B) are provided pursuant to a plan of care prescribed by a licensed health care practitioner.
+
+(2) Chronically ill individual (A) In general The term “chronically ill individual” means any individual who has been certified by a licensed health care practitioner as—
+
+(i) being unable to perform (without substantial assistance from another individual) at least 2 activities of daily living for a period of at least 90 days due to a loss of functional capacity,
+
+(ii) having a level of disability similar (as determined under regulations prescribed by the Secretary in consultation with the Secretary of Health and Human Services) to the level of disability described in clause (i), or
+
+(iii) requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment.
+
+Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the preceding 12-month period a licensed health care practitioner has certified that such individual meets such requirements.
+
+(B) Activities of daily living For purposes of subparagraph (A), each of the following is an activity of daily living:
+
+(i) Eating.
+
+(ii) Toileting.
+
+(iii) Transferring.
+
+(iv) Bathing.
+
+(v) Dressing.
+
+(vi) Continence.
+
+A contract shall not be treated as a qualified long-term care insurance contract unless the determination of whether an individual is a chronically ill individual described in subparagraph (A)(i) takes into account at least 5 of such activities.
+
+(3) Maintenance or personal care services The term “maintenance or personal care services” means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).
+
+(4) Licensed health care practitioner The term “licensed health care practitioner” means any physician (as defined in section 1861(r)(1) of the Social Security Act) and any registered professional nurse, licensed social worker, or other individual who meets such requirements as may be prescribed by the Secretary.
+
+(d) Aggregate payments in excess of limits (1) In general If the aggregate of—
+
+(A) the periodic payments received for any period under all qualified long-term care insurance contracts which are treated as made for qualified long-term care services for an insured, and
+
+(B) the periodic payments received for such period which are treated under section 101(g) as paid by reason of the death of such insured,
+
+exceeds the per diem limitation for such period, such excess shall be includible in gross income without regard to section 72. A payment shall not be taken into account under subparagraph (B) if the insured is a terminally ill individual (as defined in section 101(g)) at the time the payment is received.
+
+(2) Per diem limitation For purposes of paragraph (1), the per diem limitation for any period is an amount equal to the excess (if any) of—
+
+(A) the greater of—
+
+(i) the dollar amount in effect for such period under paragraph (4), or
+
+(ii) the costs incurred for qualified long-term care services provided for the insured for such period, over
+
+(B) the aggregate payments received as reimbursements (through insurance or otherwise) for qualified long-term care services provided for the insured during such period.
+
+(3) Aggregation rules For purposes of this subsection—
+
+(A) all persons receiving periodic payments described in paragraph (1) with respect to the same insured shall be treated as 1 person, and
+
+(B) the per diem limitation determined under paragraph (2) shall be allocated first to the insured and any remaining limitation shall be allocated among the other such persons in such manner as the Secretary shall prescribe.
+
+(4) Dollar amount The dollar amount in effect under this subsection shall be $175 per day (or the equivalent amount in the case of payments on another periodic basis).
+
+(5) Inflation adjustment In the case of a calendar year after 1997, the dollar amount contained in paragraph (4) shall be increased at the same time and in the same manner as amounts are increased pursuant to section 213(d)(10).
+
+(6) Periodic payments For purposes of this subsection, the term “periodic payment” means any payment (whether on a periodic basis or otherwise) made without regard to the extent of the costs incurred by the payee for qualified long-term care services.
+
+(e) Treatment of coverage provided as part of a life insurance or annuity contract Except as otherwise provided in regulations prescribed by the Secretary, in the case of any long-term care insurance coverage (whether or not qualified) provided by a rider on or as part of a life insurance contract or an annuity contract—
+
+(1) In general This title shall apply as if the portion of the contract providing such coverage is a separate contract.
+
+(2) Denial of deduction under section 213 No deduction shall be allowed under section 213(a) for any payment made for coverage under a qualified long-term care insurance contract if such payment is made as a charge against the cash surrender value of a life insurance contract or the cash value of an annuity contract.
+
+(3) Portion defined For purposes of this subsection, the term “portion” means only the terms and benefits under a life insurance contract or annuity contract that are in addition to the terms and benefits under the contract without regard to long-term care insurance coverage.
+
+(4) Annuity contracts to which paragraph (1) does not apply For purposes of this subsection, none of the following shall be treated as an annuity contract:
+
+(A) A trust described in section 401(a) which is exempt from tax under section 501(a).
+
+(B) A contract—
+
+(i) purchased by a trust described in subparagraph (A),
+
+(ii) purchased as part of a plan described in section 403(a),
+
+(iii) described in section 403(b),
+
+(iv) provided for employees of a life insurance company under a plan described in section 818(a)(3), or
+
+(v) from an individual retirement account or an individual retirement annuity.
+
+(C) A contract purchased by an employer for the benefit of the employee (or the employee’s spouse).
+
+Any dividend described in section 404(k) which is received by a participant or beneficiary shall, for purposes of this paragraph, be treated as paid under a separate contract to which subparagraph (B)(i) applies.
+
+(f) Treatment of certain State-maintained plans (1) In general If—
+
+(A) an individual receives coverage for qualified long-term care services under a State long-term care plan, and
+
+(B) the terms of such plan would satisfy the requirements of subsection (b) were such plan an insurance contract,
+
+such plan shall be treated as a qualified long-term care insurance contract for purposes of this title.
+
+(2) State long-term care plan For purposes of paragraph (1), the term “State long-term care plan” means any plan—
+
+(A) which is established and maintained by a State or an instrumentality of a State,
+
+(B) which provides coverage only for qualified long-term care services, and
+
+(C) under which such coverage is provided only to—
+
+(i) employees and former employees of a State (or any political subdivision or instrumentality of a State),
+
+(ii) the spouses of such employees, and
+
+(iii) individuals bearing a relationship to such employees or spouses which is described in any of subparagraphs (A) through (G) of section 152(d)(2).
+
+(g) Consumer protection provisions (1) In general The requirements of this subsection are met with respect to any contract if the contract meets—
+
+(A) the requirements of the model regulation and model Act described in paragraph (2),
+
+(B) the disclosure requirement of paragraph (3), and
+
+(C) the requirements relating to nonforfeitability under paragraph (4).
+
+(2) Requirements of model regulation and Act (A) In general The requirements of this paragraph are met with respect to any contract if such contract meets—
+
+(i) Model regulation The following requirements of the model regulation:
+
+(I) Section 7A (relating to guaranteed renewal or noncancellability), and the requirements of section 6B of the model Act relating to such section 7A.
+
+(II) Section 7B (relating to prohibitions on limitations and exclusions).
+
+(III) Section 7C (relating to extension of benefits).
+
+(IV) Section 7D (relating to continuation or conversion of coverage).
+
+(V) Section 7E (relating to discontinuance and replacement of policies).
+
+(VI) Section 8 (relating to unintentional lapse).
+
+(VII) Section 9 (relating to disclosure), other than section 9F thereof.
+
+(VIII) Section 10 (relating to prohibitions against post-claims underwriting).
+
+(IX) Section 11 (relating to minimum standards).
+
+(X) Section 12 (relating to requirement to offer inflation protection), except that any requirement for a signature on a rejection of inflation protection shall permit the signature to be on an application or on a separate form.
+
+(XI) Section 23 (relating to prohibition against preexisting conditions and probationary periods in replacement policies or certificates).
+
+(ii) Model Act The following requirements of the model Act:
+
+(I) Section 6C (relating to preexisting conditions).
+
+(II) Section 6D (relating to prior hospitalization).
+
+(B) Definitions For purposes of this paragraph—
+
+(i) Model provisions The terms “model regulation” and “model Act” mean the long-term care insurance model regulation, and the long-term care insurance model Act, respectively, promulgated by the National Association of Insurance Commissioners (as adopted as of January 1993).
+
+(ii) Coordination Any provision of the model regulation or model Act listed under clause (i) or (ii) of subparagraph (A) shall be treated as including any other provision of such regulation or Act necessary to implement the provision.
+
+(iii) Determination For purposes of this section and section 4980C, the determination of whether any requirement of a model regulation or the model Act has been met shall be made by the Secretary.
+
+(3) Disclosure requirement The requirement of this paragraph is met with respect to any contract if such contract meets the requirements of section 4980C(d).
+
+(4) Nonforfeiture requirements (A) In general The requirements of this paragraph are met with respect to any level premium contract, if the issuer of such contract offers to the policyholder, including any group policyholder, a nonforfeiture provision meeting the requirements of subparagraph (B).
+
+(B) Requirements of provision The nonforfeiture provision required under subparagraph (A) shall meet the following requirements:
+
+(i) The nonforfeiture provision shall be appropriately captioned.
+
+(ii) The nonforfeiture provision shall provide for a benefit available in the event of a default in the payment of any premiums and the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency, and interest as reflected in changes in rates for premium paying contracts approved by the appropriate State regulatory agency for the same contract form.
+
+(iii) The nonforfeiture provision shall provide at least one of the following:
+
+(I) Reduced paid-up insurance.
+
+(II) Extended term insurance.
+
+(III) Shortened benefit period.
+
+(IV) Other similar offerings approved by the appropriate State regulatory agency.
+
+(5) Cross reference For coordination of the requirements of this subsection with State requirements, see section 4980C(f).
+
+(Added and amended Pub. L. 104–191, title III, §§ 321(a), 325, Aug. 21, 1996, 110 Stat. 2054, 2063; Pub. L. 105–34, title XVI, § 1602(b), (e), Aug. 5, 1997, 111 Stat. 1094; Pub. L. 105–206, title VI, § 6023(28), July 22, 1998, 112 Stat. 826; Pub. L. 108–311, title II, § 207(25), Oct. 4, 2004, 118 Stat. 1178; Pub. L. 109–280, title VIII, § 844(c), (f), Aug. 17, 2006, 120 Stat. 1011, 1013.)
+
+## Notes
+
+Inflation Adjusted Items for Certain YearsFor inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.
+
+Editorial Notes
+
+References in TextThe Social Security Act, referred to in subsec. (b)(1)(B), (2)(B)(i), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is classified generally to subchapter XVIII (§ 1395 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. Section 1861(r)(1) of the Act is classified to section 1395x(r)(1) of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.
+
+Amendments2006—Subsec. (e). Pub. L. 109–280, § 844(c), amended subsec. (e) generally. Prior to amendment, subsec. (e) related to treatment of coverage provided as part of a life insurance contract. Subsec. (e)(1). Pub. L. 109–280, § 844(f), substituted “title” for “section”. 2004—Subsec. (f)(2)(C)(iii). Pub. L. 108–311 substituted “subparagraphs (A) through (G) of section 152(d)(2)” for “paragraphs (1) through (8) of section 152(a)”. 1998—Subsec. (e)(2). Pub. L. 105–206 inserted “section” after “Application of” in heading. 1997—Subsec. (c)(2)(B). Pub. L. 105–34, § 1602(b), inserted “described in subparagraph (A)(i)” after “chronically ill individual” in concluding provisions. Subsec. (g)(4)(B)(ii), (iii)(IV). Pub. L. 105–34, § 1602(e), substituted “appropriate State regulatory agency” for “Secretary”. 1996—Subsec. (g). Pub. L. 104–191, § 325, added subsec. (g).
+
+Statutory Notes and Related Subsidiaries
+
+Effective Date of 2006 AmendmentAmendment by Pub. L. 109–280 applicable to contracts issued after Dec. 31, 1996, but only with respect to taxable years beginning after Dec. 31, 2009, except as otherwise provided, see section 844(g)(1) of Pub. L. 109–280, set out as a note under section 72 of this title. Amendment by section 844(f) of Pub. L. 109–280 effective as if included in section 321(a) of Pub. L. 104–191, see section 844(g)(5) of Pub. L. 109–280, set out as a note under section 72 of this title.
+
+Effective Date of 2004 AmendmentAmendment by Pub. L. 108–311 applicable to taxable years beginning after Dec. 31, 2004, see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title.
+
+Effective Date of 1997 AmendmentAmendment by Pub. L. 105–34 effective as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996, Pub. L. 104–191, to which such amendment relates, see section 1602(i) of Pub. L. 105–34, set out as a note under section 26 of this title.
+
+Effective Date of 1996 AmendmentAmendment by section 325 of Pub. L. 104–191 applicable to contracts issued after Dec. 31, 1996, with provisions of section 321(f) of Pub. L. 104–191, set out as an Effective Date note below, applicable to such contracts, see section 327 of Pub. L. 104–191, set out as an Effective Date note under section 4980C of this title.
+
+Effective DatePub. L. 104–191, title III, § 321(f), Aug. 21, 1996, 110 Stat. 2059, provided that: “(1) General effective date.—“(A) In general.—Except as provided in subparagraph (B), the amendments made by this section [enacting this section and amending sections 106, 125, 807, and 4980B of this title, section 1167 of Title 29, Labor, and section 300bb–8 of Title 42, The Public Health and Welfare] shall apply to contracts issued after December 31, 1996. “(B) Reserve method.—The amendment made by subsection (b) [amending section 807 of this title] shall apply to contracts issued after December 31, 1997. “(2) Continuation of existing policies.—In the case of any contract issued before January 1, 1997, which met the long-term care insurance requirements of the State in which the contract was sitused [sic] at the time the contract was issued—“(A) such contract shall be treated for purposes of the Internal Revenue Code of 1986 as a qualified long-term care insurance contract (as defined in section 7702B(b) of such Code), and “(B) services provided under, or reimbursed by, such contract shall be treated for such purposes as qualified long-term care services (as defined in section 7702B(c) of such Code). In the case of an individual who is covered on December 31, 1996, under a State long-term care plan (as defined in section 7702B(f)(2) of such Code), the terms of such plan on such date shall be treated for purposes of the preceding sentence as a contract issued on such date which met the long-term care insurance requirements of such State. “(3) Exchanges of existing policies.—If, after the date of enactment of this Act [Aug. 21, 1996] and before January 1, 1998, a contract providing for long-term care insurance coverage is exchanged solely for a qualified long-term care insurance contract (as defined in section 7702B(b) of such Code), no gain or loss shall be recognized on the exchange. If, in addition to a qualified long-term care insurance contract, money or other property is received in the exchange, then any gain shall be recognized to the extent of the sum of the money and the fair market value of the other property received. For purposes of this paragraph, the cancellation of a contract providing for long-term care insurance coverage and reinvestment of the cancellation proceeds in a qualified long-term care insurance contract within 60 days thereafter shall be treated as an exchange. “(4) Issuance of certain riders permitted.—For purposes of applying sections 101(f), 7702, and 7702A of the Internal Revenue Code of 1986 to any contract—“(A) the issuance of a rider which is treated as a qualified long-term care insurance contract under section 7702B, and “(B) the addition of any provision required to conform any other long-term care rider to be so treated, shall not be treated as a modification or material change of such contract. “(5) Application of per diem limitation to existing contracts.—The amount of per diem payments made under a contract issued on or before July 31, 1996, with respect to an insured which are excludable from gross income by reason of section 7702B of the Internal Revenue Code of 1986 (as added by this section) shall not be reduced under subsection (d)(2)(B) thereof by reason of reimbursements received under a contract issued on or before such date. The preceding sentence shall cease to apply as of the date (after July 31, 1996) such contract is exchanged or there is any contract modification which results in an increase in the amount of such per diem payments or the amount of such reimbursements.”
+
+Long-Term Care Study RequestPub. L. 104–191, title III, § 321(g), Aug. 21, 1996, 110 Stat. 2060, related to a study of the marketing and other effects of per diem limits on certain types of long-term care policies, and provided that if the National Association of Insurance Commissioners agreed to the study request by Congress, the Association would report the results of the study not later than 2 years after accepting the request.

legal/us/code/title-26/chapter-79/section-7703.md

@@ -0,0 +1,65 @@
+---
+type: "LegalText"
+title: "26 U.S.C. § 7703"
+description: "Determination of marital status"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7703"
+citation: "26 U.S.C. § 7703"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7703"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "77d6fb7c36ed4b4c32652d76cc50b182d87c3fe0640a978dc19196c0b78614cc"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "a7acefe392f72eb86cf4ec7e9dab0ec2eff266a007f83792578dc7edc2c9f88b"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7703 - Determination of marital status
+
+## Text
+
+(a) General rule For purposes of part V of subchapter B of chapter 1 and those provisions of this title which refer to this subsection—
+
+(1) the determination of whether an individual is married shall be made as of the close of his taxable year; except that if his spouse dies during his taxable year such determination shall be made as of the time of such death; and
+
+(2) an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
+
+(b) Certain married individuals living apart For purposes of those provisions of this title which refer to this subsection, if—
+
+(1) an individual who is married (within the meaning of subsection (a)) and who files a separate return maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a child (within the meaning of section 152(f)(1)) with respect to whom such individual is entitled to a deduction for the taxable year under section 151 (or would be so entitled but for section 152(e)),
+
+(2) such individual furnishes over one-half of the cost of maintaining such household during the taxable year, and
+
+(3) during the last 6 months of the taxable year, such individual’s spouse is not a member of such household,
+
+such individual shall not be considered as married.
+
+(Added Pub. L. 99–514, title XIII, § 1301(j)(2)(A), Oct. 22, 1986, 100 Stat. 2657; amended Pub. L. 100–647, title I, § 1018(u)(41), Nov. 10, 1988, 102 Stat. 3592; Pub. L. 108–311, title II, § 207(26), Oct. 4, 2004, 118 Stat. 1178.)
+
+## Notes
+
+Editorial Notes
+
+Prior ProvisionsProvisions relating to determination of marital status were formerly contained in section 143 of this title, prior to enactment of this section by Pub. L. 99–514.
+
+Amendments2004—Subsec. (b)(1). Pub. L. 108–311 substituted “152(f)(1)” for “151(c)(3)” and struck out “paragraph (2) or (4) of” before “section 152(e)),”. 1988—Subsec. (b)(1). Pub. L. 100–647 substituted “section 151(c)(3)” for “section 151(e)(3)”.
+
+Statutory Notes and Related Subsidiaries
+
+Effective Date of 2004 AmendmentAmendment by Pub. L. 108–311 applicable to taxable years beginning after Dec. 31, 2004, see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title.
+
+Effective Date of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
+
+Effective DateSection applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 of Pub. L. 99–514, set out as an Effective Date; Transitional Rules note under section 141 of this title.

legal/us/code/title-26/chapter-79/section-7704.md

@@ -0,0 +1,167 @@
+---
+type: "LegalText"
+title: "26 U.S.C. § 7704"
+description: "Certain publicly traded partnerships treated as corporations"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7704"
+citation: "26 U.S.C. § 7704"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7704"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "1aaf65b14fb5bf9944ad6329fa427ec6b74edda870981d0aa22916e5bdd99a37"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "57012a3a4dd46e22550609d510ad32def4597507e9a85831cbab3b7952b734c2"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7704 - Certain publicly traded partnerships treated as corporations
+
+## Text
+
+(a) General rule For purposes of this title, except as provided in subsection (c), a publicly traded partnership shall be treated as a corporation.
+
+(b) Publicly traded partnership For purposes of this section, the term “publicly traded partnership” means any partnership if—
+
+(1) interests in such partnership are traded on an established securities market, or
+
+(2) interests in such partnership are readily tradable on a secondary market (or the substantial equivalent thereof).
+
+(c) Exception for partnerships with passive-type income (1) In general Subsection (a) shall not apply to any publicly traded partnership for any taxable year if such partnership met the gross income requirements of paragraph (2) for such taxable year and each preceding taxable year beginning after December 31, 1987, during which the partnership (or any predecessor) was in existence. For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.
+
+(2) Gross income requirements A partnership meets the gross income requirements of this paragraph for any taxable year if 90 percent or more of the gross income of such partnership for such taxable year consists of qualifying income.
+
+(3) Exception not to apply to certain partnerships which could qualify as regulated investment companies This subsection shall not apply to any partnership which would be described in section 851(a) if such partnership were a domestic corporation. To the extent provided in regulations, the preceding sentence shall not apply to any partnership a principal activity of which is the buying and selling of commodities (not described in section 1221(a)(1)), or options, futures, or forwards with respect to commodities.
+
+(d) Qualifying income For purposes of this section—
+
+(1) In general Except as otherwise provided in this subsection, the term “qualifying income” means—
+
+(A) interest,
+
+(B) dividends,
+
+(C) real property rents,
+
+(D) gain from the sale or other disposition of real property (including property described in section 1221(a)(1)),
+
+(E) income and gains derived from—
+
+(i) the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy, and timber), or industrial source carbon dioxide,
+
+(ii) the transportation or storage of—
+
+(I) any fuel described in subsection (b), (c), (d), (e), or (k) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1) or sustainable aviation fuel as defined in section 40B(d)(1), or
+
+(II) liquified hydrogen or compressed hydrogen,
+
+(iii) in the case of a qualified facility (as defined in section 45Q(d), without regard to any date by which construction of the facility or equipment is required to begin) not less than 50 percent of the total carbon oxide production of which is qualified carbon oxide (as defined in section 45Q(c))—
+
+(I) the generation, availability for such generation, or storage of electric power at such facility, or
+
+(II) the capture of carbon dioxide by such facility,
+
+(iv) the production of electricity from any advanced nuclear facility (as defined in section 45J(d)(2)),
+
+(v) the production of electricity or thermal energy exclusively using a qualified energy resource described in subparagraph (D) or (H) of section 45(c)(1), or
+
+(vi) the operation of energy property described in clause (iii) or (vii) of section 48(a)(3)(A) (determined without regard to any requirement under such section with respect to the date on which construction of property begins).
+
+(F) any gain from the sale or disposition of a capital asset (or property described in section 1231(b)) held for the production of income described in any of the foregoing subparagraphs of this paragraph, and
+
+(G) in the case of a partnership described in the second sentence of subsection (c)(3), income and gains from commodities (not described in section 1221(a)(1)) or futures, forwards, and options with respect to commodities.
+
+For purposes of subparagraph (E), the term “mineral or natural resource” means any product of a character with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).
+
+(2) Certain interest not qualified Interest shall not be treated as qualifying income if—
+
+(A) such interest is derived in the conduct of a financial or insurance business, or
+
+(B) such interest would be excluded from the term “interest” under section 856(f).
+
+(3) Real property rent The term “real property rent” means amounts which would qualify as rent from real property under section 856(d) if—
+
+(A) such section were applied without regard to paragraph (2)(C) thereof (relating to independent contractor requirements), and
+
+(B) stock owned, directly or indirectly, by or for a partner would not be considered as owned under section 318(a)(3)(A) by the partnership unless 5 percent or more (by value) of the interests in such partnership are owned, directly or indirectly, by or for such partner.
+
+(4) Certain income qualifying under regulated investment company or real estate trust provisions The term “qualifying income” also includes any income which would qualify under section 851(b)(2)(A) or 856(c)(2).
+
+(5) Special rule for determining gross income from certain real property sales In the case of the sale or other disposition of real property described in section 1221(a)(1), gross income shall not be reduced by inventory costs.
+
+(e) Inadvertent terminations If—
+
+(1) a partnership fails to meet the gross income requirements of subsection (c)(2),
+
+(2) the Secretary determines that such failure was inadvertent,
+
+(3) no later than a reasonable time after the discovery of such failure, steps are taken so that such partnership once more meets such gross income requirements, and
+
+(4) such partnership agrees to make such adjustments (including adjustments with respect to the partners) or to pay such amounts as may be required by the Secretary with respect to such period,
+
+then, notwithstanding such failure, such entity shall be treated as continuing to meet such gross income requirements for such period.
+
+(f) Effect of becoming corporation As of the 1st day that a partnership is treated as a corporation under this section, for purposes of this title, such partnership shall be treated as—
+
+(1) transferring all of its assets (subject to its liabilities) to a newly formed corporation in exchange for the stock of the corporation, and
+
+(2) distributing such stock to its partners in liquidation of their interests in the partnership.
+
+(g) Exception for electing 1987 partnerships (1) In general Subsection (a) shall not apply to an electing 1987 partnership.
+
+(2) Electing 1987 partnership For purposes of this subsection, the term “electing 1987 partnership” means any publicly traded partnership if—
+
+(A) such partnership is an existing partnership (as defined in section 10211(c)(2) of the Revenue Reconciliation Act of 1987),
+
+(B) subsection (a) has not applied (and without regard to subsection (c)(1) would not have applied) to such partnership for all prior taxable years beginning after December 31, 1987, and before January 1, 1998, and
+
+(C) such partnership elects the application of this subsection, and consents to the application of the tax imposed by paragraph (3), for its first taxable year beginning after December 31, 1997.
+
+A partnership which, but for this sentence, would be treated as an electing 1987 partnership shall cease to be so treated (and the election under subparagraph (C) shall cease to be in effect) as of the 1st day after December 31, 1997, on which there has been an addition of a substantial new line of business with respect to such partnership.
+
+(3) Additional tax on electing partnerships (A) Imposition of tax There is hereby imposed for each taxable year on the income of each electing 1987 partnership a tax equal to 3.5 percent of such partnership’s gross income for the taxable year from the active conduct of trades and businesses by the partnership.
+
+(B) Adjustments in the case of tiered partnerships For purposes of this paragraph, in the case of a partnership which is a partner in another partnership, the gross income referred to in subparagraph (A) shall include the partnership’s distributive share of the gross income of such other partnership from the active conduct of trades and businesses of such other partnership. A similar rule shall apply in the case of lower-tiered partnerships.
+
+(C) Treatment of tax For purposes of this title, the tax imposed by this paragraph shall be treated as imposed by chapter 1 other than for purposes of determining the amount of any credit allowable under chapter 1 and shall be paid by the partnership. Section 6655 shall be applied to such partnership with respect to such tax in the same manner as if the partnership were a corporation, such tax were imposed by section 11, and references in such section to taxable income were references to the gross income referred to in subparagraph (A).
+
+(4) Election An election and consent under this subsection shall apply to the taxable year for which made and all subsequent taxable years unless revoked by the partnership. Such revocation may be made without the consent of the Secretary, but, once so revoked, may not be reinstated.
+
+(Added Pub. L. 100–203, title X, § 10211(a), Dec. 22, 1987, 101 Stat. 1330–403; amended Pub. L. 100–647, title II, § 2004(f)(1), (3)–(5), Nov. 10, 1988, 102 Stat. 3602, 3603; Pub. L. 105–34, title IX, § 964(a), Aug. 5, 1997, 111 Stat. 892; Pub. L. 105–206, title VI, § 6009(b)(1), July 22, 1998, 112 Stat. 812; Pub. L. 106–170, title V, § 532(c)(2)(V)–(Y), Dec. 17, 1999, 113 Stat. 1931; Pub. L. 108–357, title III, § 331(e), Oct. 22, 2004, 118 Stat. 1476; Pub. L. 110–343, div. B, title I, § 116(a), title II, § 208(a), Oct. 3, 2008, 122 Stat. 3831, 3840; Pub. L. 119–21, title VII, § 70524(a), July 4, 2025, 139 Stat. 281.)
+
+## Notes
+
+Editorial Notes
+
+References in TextSection 10211(c)(2) of the Revenue Reconciliation Act of 1987, referred to in subsec. (g)(2)(A), probably means section 10211(c)(2) of the Revenue Act of 1987, title X of Pub. L. 100–203, which is set out as a note below.
+
+Amendments2025—Subsec. (d)(1)(E). Pub. L. 119–21 substituted “gains derived from—” for “gains derived from”, inserted cl. (i) designation before “the exploration”, inserted “or” before “industrial source”, and substituted cls. (ii) to (vi) for “or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1),”. 2008—Subsec. (d)(1)(E). Pub. L. 110–343, § 208(a), substituted “, industrial source carbon dioxide, or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1)” for “or industrial source carbon dioxide”. Pub. L. 110–343, § 116(a), inserted “or industrial source carbon dioxide” before comma at end. 2004—Subsec. (d)(4). Pub. L. 108–357 substituted “section 851(b)(2)(A)” for “section 851(b)(2)”. 1999—Subsecs. (c)(3), (d)(1)(D), (G), (5). Pub. L. 106–170 substituted “section 1221(a)(1)” for “section 1221(1)”. 1998—Subsec. (g)(3)(C). Pub. L. 105–206 inserted at end “and shall be paid by the partnership. Section 6655 shall be applied to such partnership with respect to such tax in the same manner as if the partnership were a corporation, such tax were imposed by section 11, and references in such section to taxable income were references to the gross income referred to in subparagraph (A)”. 1997—Subsec. (g). Pub. L. 105–34 added subsec. (g). 1988—Subsec. (c)(1). Pub. L. 100–647, § 2004(f)(3), inserted at end “For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.” Subsec. (d)(1). Pub. L. 100–647, § 2004(f)(4), inserted at end “For purposes of subparagraph (E), the term ‘mineral or natural resource’ means any product of a character with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).” Subsec. (d)(3). Pub. L. 100–647, § 2004(f)(5), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘real property rent’ means amounts which would qualify as rent from real property under section 856(d) if such section were applied without regard to paragraph (2)(C) thereof (relating to independent contractor requirements).” Subsec. (e)(4). Pub. L. 100–647, § 2004(f)(1), inserted “or to pay such amounts” before “as may be required”.
+
+Statutory Notes and Related Subsidiaries
+
+Effective Date of 2025 AmendmentPub. L. 119–21, title VII, § 70524(b), July 4, 2025, 139 Stat. 282, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2025.”
+
+Effective Date of 2008 AmendmentPub. L. 110–343, div. B, title I, § 116(b), Oct. 3, 2008, 122 Stat. 3831, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.” Pub. L. 110–343, div. B, title II, § 208(b), Oct. 3, 2008, 122 Stat. 3840, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.”
+
+Effective Date of 2004 AmendmentAmendment by Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 331(h) of Pub. L. 108–357, set out as a note under section 469 of this title.
+
+Effective Date of 1999 AmendmentAmendment by Pub. L. 106–170 applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106–170, set out as a note under section 170 of this title.
+
+Effective Date of 1998 AmendmentPub. L. 105–206, title VI, § 6009(b)(2), July 22, 1998, 112 Stat. 812, provided that: “The second sentence of section 7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) shall apply to taxable years beginning after the date of the enactment of this Act [July 22, 1998].”
+
+Effective Date of 1997 AmendmentPub. L. 105–34, title IX, § 964(b), Aug. 5, 1997, 111 Stat. 893, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1997.”
+
+Effective Date of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.
+
+Effective DatePub. L. 100–203, title X, § 10211(c), Dec. 22, 1987, 101 Stat. 1330–405, as amended by Pub. L. 100–647, title II, § 2004(f)(2), Nov. 10, 1988, 102 Stat. 3602, provided that: “(1) In general.—The amendments made by this section [enacting this section] shall apply—“(A) except as provided in subparagraph (B), to taxable years beginning after December 31, 1987, or “(B) in the case of an existing partnership, to taxable years beginning after December 31, 1997. “(2) Existing partnership.—For purposes of this subsection—“(A) In general.—The term ‘existing partnership’ means any partnership if—“(i) such partnership was a publicly traded partnership on December 17, 1987, “(ii) a registration statement indicating that such partnership was to be a publicly traded partnership was filed with the Securities and Exchange Commission with respect to such partnership on or before such date, or “(iii) with respect to such partnership, an application was filed with a State regulatory commission on or before such date seeking permission to restructure a portion of a corporation as a publicly traded partnership. “(B) Special rule where substantial new line of business added after december 17, 1987.—A partnership which, but for this subparagraph, would be treated as an existing partnership shall cease to be treated as an existing partnership as of the 1st day after December 17, 1987, on which there has been an addition of a substantial new line of business with respect to such partnership. “(C) Coordination with passive-type income requirements.—In the case of an existing partnership, paragraph (1) of section 7704(c) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by substituting for ‘December 31, 1987’ the earlier of—“(i) December 31, 1997, or “(ii) the day (if any) as of which such partnership ceases to be treated as an existing partnership by reason of subparagraph (B).”

legal/us/code/title-26/chapter-79/section-7705.md

@@ -0,0 +1,121 @@
+---
+type: "LegalText"
+title: "26 U.S.C. § 7705"
+description: "Certified professional employer organizations"
+jurisdiction: "us"
+corpus: "united_states_code"
+kind: "code_section"
+title_number: 26
+title_name: "INTERNAL REVENUE CODE"
+chapter_number: "79"
+chapter_name: "DEFINITIONS"
+section: "7705"
+citation: "26 U.S.C. § 7705"
+status: "current"
+release_point: "119-100"
+release_date: "2026-06-26"
+source: "official"
+source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc26@119-100.zip"
+source_identifier: "/us/usc/t26/s7705"
+source_file: "data/legal/raw/us/code/title-26/usc26.xml"
+source_hash: "dedabeb98244691055b6ae7b226d8b4f4ab0eb26ac4b1ba424e3c7ae1019721e"
+raw_snapshot_hash: "a261f094809116f42a96648a3d5eee80fa010379d67412551c21dd5c900b27f4"
+text_hash: "c33268e13b2e9800306b53578f2a386b784b5f52cc88c3c69c977a9ab21a7f59"
+retrieved_at: "2026-07-04"
+confidence: "official"
+tags: ["legal", "us-code"]
+---
+
+# 26 U.S.C. § 7705 - Certified professional employer organizations
+
+## Text
+
+(a) In general For purposes of this title, the term “certified professional employer organization” means a person who applies to be treated as a certified professional employer organization for purposes of section 3511 and has been certified by the Secretary as meeting the requirements of subsection (b).
+
+(b) Certification requirements A person meets the requirements of this subsection if such person—
+
+(1) demonstrates that such person (and any owner, officer, and other persons as may be specified in regulations) meets such requirements as the Secretary shall establish, including requirements with respect to tax status, background, experience, business location, and annual financial audits,
+
+(2) agrees that it will satisfy the bond and independent financial review requirements of subsection (c) on an ongoing basis,
+
+(3) agrees that it will satisfy such reporting obligations as may be imposed by the Secretary,
+
+(4) computes its taxable income using an accrual method of accounting unless the Secretary approves another method,
+
+(5) agrees to verify on such periodic basis as the Secretary may prescribe that it continues to meet the requirements of this subsection, and
+
+(6) agrees to notify the Secretary in writing within such time as the Secretary may prescribe of any change that materially affects the continuing accuracy of any agreement or information that was previously made or provided under this subsection.
+
+(c) Bond and independent financial review (1) In general An organization meets the requirements of this paragraph if such organization—
+
+(A) meets the bond requirements of paragraph (2), and
+
+(B) meets the independent financial review requirements of paragraph (3).
+
+(2) Bond (A) In general A certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle C (in a form acceptable to the Secretary) that is in an amount at least equal to the amount specified in subparagraph (B).
+
+(B) Amount of bond For the period April 1 of any calendar year through March 31 of the following calendar year, the amount of the bond required is equal to the greater of—
+
+(i) 5 percent of the organization’s liability under section 3511 for taxes imposed by subtitle C during the preceding calendar year (but not to exceed $1,000,000), or
+
+(ii) $50,000.
+
+(3) Independent financial review requirements A certified professional employer organization meets the requirements of this paragraph if such organization—
+
+(A) has, as of the most recent audit date, caused to be prepared and provided to the Secretary (in such manner as the Secretary may prescribe) an opinion of an independent certified public accountant as to whether the certified professional employer organization’s financial statements are presented fairly in accordance with generally accepted accounting principles, and
+
+(B) provides to the Secretary an assertion regarding Federal employment tax payments and an examination level attestation on such assertion from an independent certified public accountant not later than the last day of the second month beginning after the end of each calendar quarter.
+
+Such assertion shall state that the organization has withheld and made deposits of all taxes imposed by chapters 21, 22, and 24 in accordance with regulations imposed by the Secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated, in all material respects.
+
+(4) Controlled group rules For purposes of the requirements of paragraphs (2) and (3), all certified professional employer organizations that are members of a controlled group within the meaning of sections 414(b) and (c) shall be treated as a single organization.
+
+(5) Failure to file assertion and attestation If the certified professional employer organization fails to file the assertion and attestation required by paragraph (3) with respect to any calendar quarter, then the requirements of paragraph (3) with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation.
+
+(6) Audit date For purposes of paragraph (3)(A), the audit date shall be six months after the completion of the organization’s fiscal year.
+
+(d) Suspension and revocation authority The Secretary may suspend or revoke a certification of any person under subsection (b) for purposes of section 3511 if the Secretary determines that such person is not satisfying the agreements or requirements of subsections (b) or (c), or fails to satisfy applicable accounting, reporting, payment, or deposit requirements.
+
+(e) Work site employee For purposes of this title—
+
+(1) In general The term “work site employee” means, with respect to a certified professional employer organization, an individual who—
+
+(A) performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph (2), and
+
+(B) performs services at a work site meeting the requirements of paragraph (3).
+
+(2) Service contract requirements A contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified professional employer organization shall—
+
+(A) assume responsibility for payment of wages to such individual, without regard to the receipt or adequacy of payment from the customer for such services,
+
+(B) assume responsibility for reporting, withholding, and paying any applicable taxes under subtitle C, with respect to such individual’s wages, without regard to the receipt or adequacy of payment from the customer for such services,
+
+(C) assume responsibility for any employee benefits which the service contract may require the certified professional employer organization to provide, without regard to the receipt or adequacy of payment from the customer for such benefits,
+
+(D) assume responsibility for recruiting, hiring, and firing workers in addition to the customer’s responsibility for recruiting, hiring, and firing workers,
+
+(E) maintain employee records relating to such individual, and
+
+(F) agree to be treated as a certified professional employer organization for purposes of section 3511 with respect to such individual.
+
+(3) Work site coverage requirement The requirements of this paragraph are met with respect to an individual if at least 85 percent of the individuals performing services for the customer at the work site where such individual performs services are subject to 1 or more contracts with the certified professional employer organization which meet the requirements of paragraph (2) (but not taking into account those individuals who are excluded employees within the meaning of section 414(q)(5)).
+
+(f) Public disclosure The Secretary shall make available to the public the name and address of—
+
+(1) each person certified as a professional employer organization under subsection (a), and
+
+(2) each person whose certification as a professional employer organization is suspended or revoked under subsection (d).
+
+(g) Determination of employment status Except to the extent necessary for purposes of section 3511, nothing in this section shall be construed to affect the determination of who is an employee or employer for purposes of this title.
+
+(h) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
+
+(Added Pub. L. 113–295, div. B, title II, § 206(b), Dec. 19, 2014, 128 Stat. 4067.)
+
+## Notes
+
+Statutory Notes and Related Subsidiaries
+
+Effective DateSection applicable with respect to wages for services performed on or after January 1 of the first calendar year beginning more than 12 months after Dec. 19, 2014, see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title.
+
+Certified Professional Employer Organization Certification ProgramPub. L. 113–295, div. B, title II, § 206(g)(2), Dec. 19, 2014, 128 Stat. 4071, provided that: “The Secretary of the Treasury shall establish the certification program described in section 7705(b) of the Internal Revenue Code of 1986, as added by subsection (b), not later than 6 months before the effective date determined under paragraph (1) [see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title].”