U.S. Code » Title 26 » Subtitle Subtitle D— Miscellaneous Excise Taxes › Chapter CHAPTER 43— QUALIFIED PENSION, ETC., PLANS

26 U.S.C. § 4974

Excise tax on certain accumulations in qualified retirement plans

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(a) General rule

If the amount distributed during the taxable year of the payee under any qualified retirement plan or any eligible deferred compensation plan (as defined in section 457(b)) is less than the minimum required distribution for such taxable year, there is hereby imposed a tax equal to 25 percent of the amount by which such minimum required distribution exceeds the actual amount distributed during the taxable year. The tax imposed by this section shall be paid by the payee.

(b) Minimum required distribution

For purposes of this section, the term “minimum required distribution” means the minimum amount required to be distributed during a taxable year under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), as the case may be, as determined under regulations prescribed by the Secretary.

(c) Qualified retirement planFor purposes of this section, the term “qualified retirement plan” means—(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),(2) an annuity plan described in section 403(a),(3) an annuity contract described in section 403(b),(4) an individual retirement account described in section 408(a), or(5) an individual retirement annuity described in section 408(b).Such term includes any plan, contract, account, or annuity which, at any time, has been determined by the Secretary to be such a plan, contract, account, or annuity.(d) Waiver of tax in certain casesIf the taxpayer establishes to the satisfaction of the Secretary that—(1) the shortfall described in subsection (a) in the amount distributed during any taxable year was due to reasonable error, and(2) reasonable steps are being taken to remedy the shortfall,the Secretary may waive the tax imposed by subsection (a) for the taxable year.(e) Reduction of tax in certain cases(1) ReductionIn the case of a taxpayer who—(A) receives a distribution, during the correction window, of the amount which resulted in imposition of a tax under subsection (a) from the same plan to which such tax relates, and(B) submits a return, during the correction window, reflecting such tax (as modified by this subsection),the first sentence of subsection (a) shall be applied by substituting “10 percent” for “25 percent”.(2) Correction windowFor purposes of this subsection, the term “correction window” means the period of time beginning on the date on which the tax under subsection (a) is imposed with respect to a shortfall of distributions from a plan described in subsection (a), and ending on the earliest of—(A) the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212,(B) the date on which the tax imposed by subsection (a) is assessed, or(C) the last day of the second taxable year that begins after the end of the taxable year in which the tax under subsection (a) is imposed.(Added Pub. L. 93–406, title II, § 2002(e), Sept. 2, 1974, 88 Stat. 967; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–600, title I, § 157(i)(1), Nov. 6, 1978, 92 Stat. 2808; Pub. L. 99–514, title XI, § 1121(a)(1), title XVIII, § 1852(a)(7)(B), (C), Oct. 22, 1986, 100 Stat. 2464, 2866; Pub. L. 117–328, div. T, title III, § 302(a), (b), Dec. 29, 2022, 136 Stat. 5339.)Editorial NotesAmendments

2022—Subsec. (a). Pub. L. 117–328, § 302(a), substituted “25 percent” for “50 percent”.

Subsec. (e). Pub. L. 117–328, § 302(b), added subsec. (e).

1986—Pub. L. 99–514, § 1121(a)(1), amended section generally, substituting provisions imposing an excise tax on certain accumulations in qualified retirement plans for provisions imposing an excise tax on certain accumulations in individual retirement accounts and annuities.

Subsec. (a). Pub. L. 99–514, § 1852(a)(7)(B), substituted “section 408(a)(6) or 408(b)(3)” for “section 408(a)(6) or (7), or 408(b)(3) or (4)”.

Subsec. (b). Pub. L. 99–514, § 1852(a)(7)(C), substituted “section 408(a)(6) or 408(b)(3)” for “section 408(a)(6) or (7) or 408(b)(3) or (4)”.

1978—Subsec. (c). Pub. L. 95–600 added subsec. (c).

1976—Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related SubsidiariesEffective Date of 2022 Amendment

Pub. L. 117–328, div. T, title III, § 302(c), Dec. 29, 2022, 136 Stat. 5339, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 29, 2022].”

Effective Date of 1986 Amendment

Amendment by section 1121(a)(1) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1988, with special provisions for plans maintained pursuant to collective bargaining agreements ratified before Mar. 1, 1986, and transition rules, see section 1121(d) of Pub. L. 99–514, set out as a note under section 401 of this title.

Amendment by section 1852(a)(7)(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 Date of 1978 Amendment

Pub. L. 95–600, title I, § 157(i)(2), Nov. 6, 1978, 92 Stat. 2809, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1975.”

Effective Date

Section effective Jan. 1, 1975, see section 2002(i)(2) of Pub. L. 93–406, set out as an Effective Date note under section 4973 of this title.

Plan Amendments Not Required Until January 1, 1989

For 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.

Notes of Decisions
Cited in 5 cases (1 in the last 5 years), 2005–2021 · leading case: George v. Duke Energy Ret. Cash Balance Plan, 560 F. Supp. 2d 444 (D.S.C. 2008).
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George v. Duke Energy Ret. Cash Balance Plan, 560 F. Supp. 2d 444 (D.S.C. 2008). · cites it 2× “April 29, 2005) (citing 26 U.S.C. § 4974 (a)). Under § 401(a)(9), a qualified pension plan must begin distributing the entire interest of the employee no later than the “required beginning date.”
In re Jolly, 567 B.R. 480 (Bankr. M.D.N.C. 2017). · cites it 2× “See Garner, 2005 WL 1288335 , at *3 (citing 26 U.S.C. § 4974 (a)). 6 Instead, the Annuity Contract provides that the Debtor “may choose an Annuity Date, an annuity option, and the frequency of annuity payments.”
Goodman v. Bramlette (In Re Bramlette), 333 B.R. 911 (Bankr. N.D. Ga. 2005). “26 U.S.C. §§ 4974 , 72(t). The annuity has a current value of approximately $79,850.”
Cassidy v. Signature Bank, 2021 IL App (1st) 191781-U (Ill. App. Ct. 2021). · cites it 2× “26 U.S.C. § 4974 (a). Moreover, even if the minimum distribution is not taken, the IRA owner may seek waiver of the tax penalty under certain circumstances.”
Omoloh v. Comm'r, 2017 T.C. Summary Opinion 64 (Tax Ct. 2017). “The 10% additional tax does not apply to certain distributions, including, as relevant here, distributions made to an individual who is age 59-1/2 or older as of the date of the distribution.”
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