U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter B— Computation of Taxable Income › Part PART III— ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

26 U.S.C. § 126

Certain cost-sharing payments

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(a) General ruleGross income does not include the excludable portion of payments received under—(1) The rural clean water program authorized by section 208(j) of the Federal Water Pollution Control Act (33 U.S.C. 1288(j)).(2) The rural abandoned mine program authorized by section 406 of the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1236).(3) The water bank program authorized by the Water Bank Act (16 U.S.C. 1301 et seq.).(4) The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978.(5) The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act (16 U.S.C. 590a).(6) The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act (7 U.S.C. 1010; 16 U.S.C. 590a et seq.).(7) Any small watershed program administered by the Secretary of Agriculture which is determined by the Secretary of the Treasury or his delegate to be substantially similar to the type of programs described in paragraphs (1) through (8).(8) Any program of a State, possession of the United States, a political subdivision of any of the foregoing, or the District of Columbia under which payments are made to individuals primarily for the purpose of conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife.(b) Excludable portionFor purposes of this section—(1) In generalThe term “excludable portion” means that portion (or all) of a payment made to any person under any program described in subsection (a) which—(A) is determined by the Secretary of Agriculture to be made primarily for the purpose of conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife, and(B) is determined by the Secretary of the Treasury or his delegate as not increasing substantially the annual income derived from the property.(2) Payments not chargeable to capital account

The term “excludable portion” does not include that portion of any payment which is properly associated with an amount which is allowable as a deduction for the taxable year in which such amount is paid or incurred.

(c) Election for section not to apply(1) In general

The taxpayer may elect not to have this section (and section 1255) apply to any excludable portion (or portion thereof).

(2) Manner and time for making election

Any election under paragraph (1) shall be made in the manner prescribed by the Secretary by regulations and shall be made not later than the due date prescribed by law (including extensions) for filing the return of tax under this chapter for the taxable year in which the payment was received or accrued.

(d) Denial of double benefits

No deduction or credit shall be allowed with respect to any expenditure which is properly associated with any amount excluded from gross income under subsection (a).

(e) Basis of property not increased by reason of excludable payments

Notwithstanding any provision of section 1016 to the contrary, no adjustment to basis shall be made with respect to property acquired or improved through the use of any payment, to the extent that such adjustment would reflect any amount which is excluded from gross income under subsection (a).

(Added Pub. L. 95–600, title V, § 543(a), Nov. 6, 1978, 92 Stat. 2888; amended Pub. L. 96–222, title I, § 105(a)(7)(A), (C), (E), Apr. 1, 1980, 94 Stat. 220, 221; Pub. L. 113–295, div. A, title II, § 221(a)(22), Dec. 19, 2014, 128 Stat. 4040; Pub. L. 115–141, div. U, title IV, § 401(b)(9), Mar. 23, 2018, 132 Stat. 1202.)Editorial NotesReferences in Text

The Water Bank Act, referred to in subsec. (a)(3), is Pub. L. 91–559, Dec. 19, 1970, 84 Stat. 1468, which is classified generally to chapter 29 (§ 1301 et seq.) of Title 16, Conservation. For complete classification of this Act to the Code, see Short Title note set out under section 1301 of Title 16 and Tables.

The Agricultural Credit Act of 1978, referred to in subsec. (a)(4), is Pub. L. 95–334, Aug. 4, 1978, 92 Stat. 420. Title IV of the Agricultural Credit Act of 1978 is classified generally to chapter 42 (§ 2201 et seq.) of Title 16, Conservation. For complete classification of this Act to the Code, see Tables.

The Soil Conservation and Domestic Allotment Act, referred to in subsec. (a)(5), (6), is act Apr. 27, 1935, ch. 85, 49 Stat. 163, which is classified generally to chapter 3B (§ 590a et seq.) of Title 16, Conservation. For complete classification of this Act to the Code, see section 590q of Title 16 and Tables.

The Bankhead-Jones Farm Tenant Act, referred to in subsec. (a)(6), is act July 22, 1937, ch. 517, 50 Stat. 522, which is classified generally to chapter 33 (§ 1000 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1000 of Title 7 and Tables.

Prior Provisions

A prior section 126 was renumbered section 140 of this title.

Amendments

2018—Subsec. (a)(7) to (9). Pub. L. 115–141 redesignated pars. (8) and (9) as (7) and (8), respectively, and struck out former par. (7) which read as follows: “The forestry incentives program authorized by section 4 of the Cooperative Forestry Assistance Act of 1978 (16 U.S.C. 2103).”

2014—Subsec. (a)(6) to (10). Pub. L. 113–295 redesignated pars. (7) to (10) as (6) to (9), respectively, and struck out former par. (6) which read as follows: “The great plains conservation program authorized by section 16 of the Soil Conservation and Domestic Policy Act (16 U.S.C. 590p(b)).”

1980—Subsec. (a). Pub. L. 96–222, § 105(a)(7)(C), (E), inserted in par. (9) “or his delegate” after “Secretary of the Treasury” and substituted in par. (10) “Any program of a State, possession of the United States, a political subdivision of any of the foregoing, or the District of Columbia” for “Any State program”.

Subsec. (b). Pub. L. 96–222, § 105(a)(7)(A), inserted provisions relating to payments not chargeable to capital account.

Subsec. (c). Pub. L. 96–222, § 105(a)(7)(A), substituted provisions allowing the taxpayer to elect not to have this section apply to any excludable portion for provisions relating to the application of subsec. (a) of this section with other sections.

Subsecs. (d), (e). Pub. L. 96–222, § 105(a)(7)(A), added subsecs. (d) and (e).

Statutory Notes and Related SubsidiariesEffective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date

Pub. L. 95–600, title V, § 543(d), Nov. 6, 1978, 92 Stat. 2890, provided that: “The amendments made by this section [enacting this section and section 1255 of this title] shall apply with respect to grants made under the programs after September 30, 1979.”

Savings Provision

For provisions that nothing in amendment by Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.

Notes of Decisions
Cited in 21 cases, 1949–1962 · leading case: Commissioner of Internal Revenue v. Mnookin's Estate
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Commissioner of Internal Revenue v. Mnookin's Estate (1950) ca8 “…(whether beginning on, before, or after January 1, 1939) ending within or with the taxable . year of the partner.” 26 U.S.C.A. §§ 126 , 181, 182, 188.”
Commissioner of Internal Revenue v. Linde (1954) ca9 “a decedent which are not properly includible in respect of the taxable period in which falls the date of his death or a prior period shall be included in the gross income, for the taxable year when received of: (A) the estate of the decedent, if the right to receive the amount…”
O'Daniel's Estate v. Commissioner of Internal Revenue (1949) ca2 “Section 126(a) of the Internal Revenue Code, 26 U.S.C.A. § 126 (a), provides as follows: “(a) Inclusion of gross income.”
Hilda Bounds v. United States (1958) ca4 “” 26 U.S.C.A. § 126 (a) (1) (A). 5 . The full text of the Information Release reads as follows: “In view of a number of adverse court decisions in cases involving voluntary payments to widows by their deceased husbands’ employers, the Internal Revenue Service today announced…”
Frances E. Latendresse v. Commissioner of Internal Revenue (1957) ca7 “The principal question here for decision is whether insurance renewal commissions received by the taxpayer in the years 1946 through 1949 should be included in her gross income for those years as income in respect of her deceased husband within the meaning of § 126(a) (1), (3)…”
Lincoln Storage Warehouses v. Commissioner of Internal Revenue (1950) ca3 “13 for rent ($18,350) and interest ($755.13) on the accrual basis.”
United States v. Ellis (1957) nysd “The surviving partners recognized this factor, since they deducted the distributable share from partnership earnings payable to the dormant partner in computing their own distributive shares for tax purposes.”
Estate of Robert L. Clymer, Deceased, Edward O. Steely and Doylestown Trust Company, Executors v. Commissioner of Intern (1955) ca3 “” 26 U.S.C.A. § 126 (a) “§ 162. Net income “The net income of the estate or trust shall be computed in the same manner and on the same basis as in the case of an individual, except that— “(a) Subject to the provisions of subsection (g), there shall be allowed as a deduction (in…”
Hess v. Commissioner (1959) ca3 · cites it 2× “§ 22 (b) (1) (B)? Third, should the taxpayers be allowed a deduction under Section 126(c) of the 1939 Code, 26 U.S.C.A. § 126 (e)? The court answered the first two questions in the affirmative and the last in the negative.”
Girard Trust Co. v. United States (1950) ca3 “832, 26 U.S.C.A. § 126 note. ■ 2 . Actually, the taxpayers filed two different claims for refund.”
Estate of Freund v. Commissioner (1962) ca2 “Freund’s share of the 1954 partnership income was includible in the estate under Section 126 (a) of the 1939 Code, 26 U.S.C.A. § 126 (a), dealing with “income in respect of decedents.”
Midland National Bank of Billings v. United States (1959) mtd “03 collected from the accounts receivable was included as income pursuant to section 126(a) (1) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 126 (a) (1). 1 By reason of the distribution to the beneficiaries, a deduction was claimed under section 162, 26 U.”
Show all 21 citing cases →
— 26 U.S.C. § 126(c) — 1 case
Hess v. Commissioner (1959) ca3 “§ 22 (b) (1) (B)? Third, should the taxpayers be allowed a deduction under Section 126(c) of the 1939 Code, 26 U.S.C.A. § 126 (e)? The court answered the first two questions in the affirmative and the last in the negative.”
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.