§ 4971. Taxes on Failure to Meet Minimum Funding Standards

(a) Initial tax

     For each taxable year of an employer who maintains a plan to which section 412 applies, there is hereby imposed a tax of 10 percent (5 percent in the case of a multiemployer plan) on the amount of the accumulated funding deficiency under the plan, determined as of the end of the plan year ending with or within such taxable year.

(b) Additional tax

     In any case in which an initial tax is imposed by subsection (a) on an accumulated funding deficiency and such accumulated funding deficiency is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of such accumulated funding deficiency to the extent not corrected.

(c) Definitions

     For purposes of this section—

(1) Accumulated funding deficiency

     The term "accumulated funding deficiency" has the meaning given to such term by the last two sentences of section 412(a).

(2) Correct

     The term "correct" means, with respect to an accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency as of the end of a plan year in which such deficiency arose to zero.

(3) Taxable period

     The term "taxable period" means, with respect to an accumulated funding deficiency, the period beginning with the end of the plan year in which there is an accumulated funding deficiency and ending on the earlier of—

     (A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a), or

     (B) the date on which the tax imposed by subsection (a) is assessed.

(d) Notification of the Secretary of Labor

     Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)—

     (1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, or

     (2) to comment on the imposition of such tax.

In the case of a multiemployer plan which is in reorganization under section 418, the same notice and opportunity shall be provided to the Pension Benefit Guaranty Corporation.

(e) Liability for tax

(1) In general

     Except as provided in paragraph (2), the tax imposed by subsection (a), (b), or (f) shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(b)(3)(A).

(2) Joint and several liability where employer member of controlled group

(A) In general

     In the case of a plan other than a multiemployer plan, if the employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for the tax imposed by subsection (a), (b), or (f).

(B) Controlled group

     For purposes of subparagraph (A), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.

(f) Failure to pay liquidity shortfall

(1) In general

     In the case of a plan to which section 412(m)(5) applies, there is hereby imposed a tax of 10 percent of the excess (if any) of—

     (A) the amount of the liquidity shortfall for any quarter, over

     (B) the amount of such shortfall which is paid by the required installment under section 412(m) for such quarter (but only if such installment is paid on or before the due date for such installment).

(2) Additional tax

     If the plan has a liquidity shortfall as of the close of any quarter and as of the close of each of the following 4 quarters, there is hereby imposed a tax equal to 100 percent of the amount on which tax was imposed by paragraph (1) for such first quarter.

(3) Definitions and special rule

(A) Liquidity shortfall; quarter

     For purposes of this subsection, the terms "liquidity shortfall" and "quarter" have the respective meanings given such terms by section 412(m)(5).

(B) Special rule

     If the tax imposed by paragraph (2) is paid with respect to any liquidity shortfall for any quarter, no further tax shall be imposed by this subsection on such shortfall for such quarter.

(4) Waiver by Secretary

     If the taxpayer establishes to the satisfaction of the Secretary that—

     (A) the liquidity shortfall described in paragraph (1) was due to reasonable cause and not willful neglect, and

     (B) reasonable steps have been taken to remedy such liquidity shortfall,

the Secretary may waive all or part of the tax imposed by this subsection.

(g) Cross references

     For disallowance of deduction for taxes paid under this section, see section 275.

     For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6).

     For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.

(Added Pub. L. 93–406, title II, § 1013(b), Sept. 2, 1974, 88 Stat. 920; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–364, title II, § 204, Sept. 26, 1980, 94 Stat. 1287; Pub. L. 96–596, § 2(a)(1)(J), (2)(H), Dec. 24, 1980, 94 Stat. 3469, 3471; Pub. L. 100–203, title IX, §§ 9304(c)(1), 9305(a), Dec. 22, 1987, 101 Stat. 1330–348, 1330–351; Pub. L. 103–465, title VII, § 751(a)(9)(B), Dec. 8, 1994, 108 Stat. 5020; Pub. L. 104–188, title I, § 1464(a), Aug. 20, 1996, 110 Stat. 1824.)

References in Text

     Section 3002(b) of title III of the Employee Retirement Income Security Act of 1974, referred to in subsec. (g), is classified to section 1202(b) of Title 29, Labor.

     1996—Subsec. (f)(4). Pub. L. 104–188 added par. (4).

     1994—Subsec. (e)(1), (2)(A). Pub. L. 103–465, § 751(a)(9)(B)(i), substituted "(a), (b), or (f)" for "(a) or (b)".

     Subsecs. (f), (g). Pub. L. 103–465, § 751(a)(9)(B)(ii), added subsec. (f) and redesignated former subsec. (f) as (g).

     1987—Subsec. (a). Pub. L. 100–203, § 9305(a)(2)(A), struck out at end "The tax imposed by this subsection shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(b)(3)(A)."

     Pub. L. 100–203, § 9304(c)(1), substituted "10 percent (5 percent in the case of a multiemployer plan)" for "5 percent".

     Subsec. (b). Pub. L. 100–203, § 9305(a)(2)(B), struck out at end "The tax imposed by this subsection shall be paid by the employer described in subsection (a)."

     Subsecs. (e), (f). Pub. L. 100–203, § 9305(a)(1), added subsec. (e) and redesignated former subsec. (e) as (f).

     1980—Subsec. (b). Pub. L. 96–596, § 2(a)(1)(J), substituted "taxable period" for "correction period".

     Subsec. (c)(1). Pub. L. 96–364, § 204(1), substituted "last two sentences" for "last sentence".

     Subsec. (c)(3). Pub. L. 96–596, § 2(a)(2)(H), substituted provision defining taxable period as the period beginning with the end of the plan year in which there is an accumulated funding deficiency and ending on the earlier of the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (a) of this section or the date on which the tax imposed by subsec. (a) of this section is assessed for provision defining correction period as the period beginning with the end of a plan year in which there is an accumulated funding deficiency and ending 90 days after the date of mailing of a notice of deficiency under section 6212 of this title with respect to the tax imposed by subsec. (b) of this section, extended by any period in which a deficiency cannot be assessed under section 6213(a) of this title and by any other period which the Secretary determines reasonable and necessary to permit a reduction of the accumulated funding deficiency to zero.

     Subsec. (d). Pub. L. 96–364, § 204(2), inserted provisions relating to a multiemployer plan in reorganization.

     1976—Subsecs. (c), (d). Pub. L. 94–455 struck out "or his delegate" after "Secretary" wherever appearing.

     Section 1464(b) of Pub. L. 104–188 provided that: "The amendment made by this section [amending this section] shall take effect as if included in the amendment made by clause (ii) of section 751(a)(9)(B) of the Retirement Protection Act of 1994 [Pub. L. 103–465] (108 Stat. 5020)."

     Amendment by Pub. L. 103–465 applicable to plan years beginning after Dec. 31, 1994, see section 751(b)(1) of Pub. L. 103–465, set out as a note under section 401 of this title.

     Section 9304(c)(2) of Pub. L. 100–203 provided that: "The amendments made by this subsection [amending this section] shall apply to plan years beginning after 1988."

     Amendment by section 9305(a) of Pub. L. 100–203 applicable with respect to plan years beginning after December 31, 1987, see section 9305(d) of Pub. L. 100–203, set out as a note under section 412 of this title.

     For effective date of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an Effective Date note under section 4961 of this title.

     Amendment by Pub. L. 96–364 effective Sept. 26, 1980, see section 210(a) of Pub. L. 96–364, set out as an Effective Date note under section 418 of this title.

     Section applicable, except as otherwise provided in section 1017(c) through (i) of Pub. L. 93–406, for plan years beginning after Sept. 2, 1974, and, in the case of plans in existence on Jan. 1, 1974, for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93–406, set out as an Effective Date; Transitional Rules note under section 410 of this title.

     For provisions directing that if any amendments made by subtitle D [§§ 1401–1465] of title I of Pub. L. 104–188 require an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year beginning on or after Jan. 1, 1998, see section 1465 of Pub. L. 104–188, set out as a note under section 401 of this title.

     This section is referred to in sections 413, 4963, 6503 of this title.