§1383 — Title 26 Internal Revenue Code | U.S. Code

Summary

When a cooperative takes a deduction for money it paid to buy back certain nonqualified notices or retain certificates, its tax for that year must be the smaller of two numbers. One number is the tax figured with the deduction. The other is the tax figured without the deduction minus any tax reductions in earlier years that would have happened if those items had been treated as qualified. If those earlier-year tax reductions are bigger than the tax figured without the deduction, the extra is treated as a tax payment on the last day you could legally pay that year's tax and is refunded or credited like an overpayment. The dollar amount used for the earlier-year math is the amount actually deductible for the year. If the second method is used to set the tax, the deduction can only be used for this rule and not for any other tax purposes.

Title 26, §1383

Internal Revenue Code — Source: USLM XML via OLRC

(a)If, under section 1382(b)(2) or (4), or (c)(2)(B), a deduction is allowable to an organization for the taxable year for amounts paid in redemption of nonqualified written notices of allocation or nonqualified per-unit retain certificates, then the tax imposed by this chapter on such organization for the taxable year shall be the lesser of the following:

(1)the tax for the taxable year computed with such deduction; or

(2)an amount equal to—

(A)the tax for the taxable year computed without such deduction, minus

(B)the decrease in tax under this chapter for any prior taxable year (or years) which would result solely from treating such nonqualified written notices of allocation or nonqualified per-unit retain certificates as qualified written notices of allocation or qualified per-unit retain certificates (as the case may be).

(b)(1)If the decrease in tax ascertained under subsection (a)(2)(B) exceeds the tax for the taxable year (computed without the deduction described in subsection (a)) such excess shall be considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year, and shall be refunded or credited in the same manner as if it were an overpayment for such taxable year.

(2)For purposes of determining the decrease in tax under subsection (a)(2)(B), the stated dollar amount of any nonqualified written notice of allocation or nonqualified per-unit retain certificate which is to be treated under such subsection as a qualified written notice of allocation or qualified per-unit retain certificate (as the case may be) shall be the amount paid in redemption of such written notice of allocation or per-unit retain certificate which is allowable as a deduction under section 1382(b)(2) or (4), or (c)(2)(B) for the taxable year.

(3)If the tax imposed by this chapter for the taxable year is the amount determined under subsection (a)(2), then the deduction described in subsection (a) shall not be taken into account for any purpose of this subtitle other than for purposes of this section.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1966—Pub. L. 89–809, § 211(a)(5), inserted “or nonqualified per-unit retain certificates” in section catchline. Subsec. (a). Pub. L. 89–809, § 211(a)(6), substituted “section 1382(b)(2) or (4)” for “1382(b)(2)” and inserted references to per-unit retain certificates. Subsec. (b)(2). Pub. L. 89–809, § 211(a)(7), substituted “section 1382(b)(2) or (4)” for “section 1382(b)(2)” and inserted references to per-unit retain certificates.

Statutory Notes and Related Subsidiaries

Effective Date

of 1966 AmendmentAmendment by Pub. L. 89–809 applicable to per-unit retain allocations made during taxable years of an organization described in section 1381(a) of this title (relating to organizations to which part I of subchapter T of chapter 1 applies) beginning after Apr. 30, 1966, with respect to products delivered during such years, see section 211(e)(1) of Pub. L. 89–809, set out as a note under section 1382 of this title.

Effective Date

Section applicable, except as otherwise provided, to taxable years of organizations described in section 1381(a) of this title beginning after Dec. 31, 1962, see section 17(c) of Pub. L. 87–834, set out as a note under section 1381 of this title.

§1383 Computation of Tax Where Cooperative Redeems Nonqualified Written Notices of Allocation or Nonqualified Per-unit Retain Certificates

Summary

Title 26, §1383

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata