the date on which the prohibited transaction occurs and ending on the earlier of "(A) the date of mailing of a notice of deficiency pursuant to section 6212, with respect to the tax imposed by subsection (a), or "(B) the date on which correction of the prohibited transaction is completed. "(3) SALE OR EXCHANGE; ENCUMBERED PROPERTY.-A transfer of real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer. 66 (4) AMOUNT INVOLVED.-The term 'amount involved' means, with respect to a prohibited transaction, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that, in the case of services described in paragraphs (2) and (10) of subsection (d) the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value "(A) in the case of the tax imposed by subsection (a), shall be determined as of the date on which the prohibited transaction occurs; and "(B) in the case of the tax imposed by subsection (b), shall be the highest fair market value during the correction period. "(5) CORRECTION.-The terms 'correction' and 'correct' mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards. “(6) CORRECTION PERIOD. The term 'correction period' means, with respect to a prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b) under section 6212, extended by— "(A) any period in which a deficiency cannot be assessed under section 6213 (a), and "(B) any other period which the Secretary or his delegate “(g) APPLICATION OF SECTION.-This section shall not apply— "(2) to a governmental plan (within the meaning of section 414(d)); or "(3) to a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410 (d) has not been made. In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, by reason of such investment, be deemed to include any assets of such company. 88 STAT. 977 26 USC 6212. Ante, p. 874. Ante, p. 925. Ante, p. 898. 54 Stat. 789. 15 USC 80a-51. T A Section 50 (relating to require subsection (a)(1)(A), E by inserting “which or (3) after described in oz "er secta 40 subsection (a)(2) and Bir secan subsection (e) and insert2010 (23), and STC many this section take effect, STUPK 11 Bertier 40 & of the Internal Reve* to under section 501(a) of if settim 3% of such Code, the denial of sal 26 47 I the disqualified person elects galie staj po me CS DR Ir pay, with respect to the 44 IN LN as the Secretary or his deleWith the meaning of section 503 (b) or Σ * fet a sea tema of exemption, a tax in the ancour aut ne namere WILL respect to the tax myst miter en 47, in such not. Ar election made under The Blanco mes nate, sh.. bencable. The Secretary THE SIE Tasly if he inert stal prescrine such regulations as 1121 18 IMESSUT TO ACT BUT THE Purposes of this subparagraph. SHILOLE SITE TË the Interna Revenue Code of 1954 (relatAg 2 tas m prolifizet zansactams su not apply to— 2 GET TË NGRIT te aller extension of credit between * Jual and a destul died person under a binding contract in DE DEZSULIG 20 renewals of such a con - The 5. De of such boat or other extension of 7324 remains & least as favorable to the plan as an arm'seigu transaction with an unrelated party would be, and if the exertion of the rotract, the making of the loan, or the *ximeon of credit was not, at the time of such execution, Wink.1.2. or extension, a prohibited transaction (within the meaning of section 53 by of such Code or the corresponding provisions of prior law); (B) a lease or joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 20, 1984, if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 33 b) of soch (C) the sale, exchange, or other disposition of prope.ty (1) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified p person, the plan receives an amount which is not less than the fair market value of the property at the time of soch disposition; and (ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition: (D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503 (b) of such Code) or the corresponding provisions of prior law; or (E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a) (2) (A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act BE STAT 979 26 050 503. of 1974, and if the plan receives not less than adequate Ante, p. 880. consideration. For the purposes of this paragraph, the term "disqualified per son” has the meaning provided by section 4975 (e) (2) of the Inter nal Revenue Code of 1954. SEC. 2004. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS. (a) PLAN REQUIREMENTS.— (1) Section 401(a) (relating to requirements for qualification) is amended by inserting after paragraph (15) the following new Ante, p. 938. paragraph: "(16) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415.” Infra. (2) Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 414 the following new section: Ante, p. 925. "SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTION UNDER QUALIFIED PLANS. "(a) GENERAL RULE.— "(1) TRUSTS.-A trust which is a part of a pension, profitsharing, or stock bonus plan shall not constitute a qualified trust under section 401 (a) if— "(A) in the case of a defined benefit plan, the plan provides for the payment of benefits with respect to a participant which exceed the limitation of subsection (b), "(B) in the case of a defined contribution plan, contributions and other additions under the plan with respect to any Ante, p. 935. "(h) NOTIFICATION OF SECRETARY OF LABOR.-Before sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary or his delegate shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax. "For provisions concerning coordination procedures between Secretary of Labor and Secretary of Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974.". (b) AMENDMENT OF SECTION 503.-Section 503 (relating to requirements for exemption) is amended (1) by striking out "or (18)" in subsection (a) (1) (A), (2) by amending subsection (a) (1) (B) by inserting "which is referred to in section 4975 (g) (2) or (3)" after "described in section 401(a)", (3) by striking out "or section 401" in subsection (a) (2) and inserting in lieu thereof "or paragraph (1)(B)", (4) by striking out "or section 401" in subsection (c) and inserting in lieu thereof "or subsection (a) (1) (B)", and (5) by striking out subsection (g). (c) EFFECTIVE DATE AND SAVINGS PROVISIONS. (1) (A) The amendments made by this section shall take effect on January 1, 1975. (B) If, before the amendments made by this section take effect, an organization described in section 401 (a) of the Internal Revenue Code of 1954 is denied exemption under section 501 (a) of such Code by reason of section 503 of such Code, the denial of such exemption shall not apply if the disqualified person elects (in such manner and at such time as the Secretary or his delegate shall by regulations prescribe) to pay, with respect to the prohibited transaction (within the meaning of section 503 (b) or (g)) which resulted in such denial of exemption, a tax in the amount and in the manner provided with respect to the tax imposed under section 4975 of such Code. An election made under this subparagraph, once made, shall be irrevocable. The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph. (2) Section 4975 of the Internal Revenue Code of 1954 (relating to tax on prohibited transactions) shall not apply to (A) a loan of money or other extension of credit between a plan and a disqualified person under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such loan or other extension of credit remains at least as favorable to the plan as an arm'slength transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503 (b) of such Code or the corresponding provisions of prior law); (B) a lease or joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503 (b) of such (C) the sale, exchange, or other disposition of prope.ty (i) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and (ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition; (D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or (E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a) (2) (A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act 88 STAT 979 26 USC 503. of 1974, and if the plan receives not less than adequate Ante, p. 880. consideration. For the purposes of this paragraph, the term "disqualified person" has the meaning provided by section 4975 (e) (2) of the Inter nal Revenue Code of 1954. SEC. 2004. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS. (a) PLAN REQUIREMENTS. (1) Section 401(a) (relating to requirements for qualification) is amended by inserting after paragraph (15) the following new paragraph: (16) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415." (2) Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 414 the following new section: "SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTION UNDER QUALIFIED PLANS. "(a) GENERAL RULE.— "(1) TRUSTS. A trust which is a part of a pension, profitsharing, or stock bonus plan shall not constitute a qualified trust under section 401 (a) if— "(A) in the case of a defined benefit plan, the plan provides for the payment of benefits with respect to a participant which exceed the limitation of subsection (b), "(B) in the case of a defined contribution plan, contributions and other additions under the plan with respect to any Ante, p. 938. Infra. Ante, p. 925. Ante, p. 935. |