US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 4972

Tax on nondeductible contributions to qualified employer plans

(a)

Tax imposed

In the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer).

(b)

Employer liable for tax

The tax imposed by this section shall be paid by the employer making the contributions.

(c)

Nondeductible contributions

For purposes of this section—
(1)

In general

The term “nondeductible contributions” means, with respect to any qualified employer plan, the sum of—
(A)
the excess (if any) of—
(i)
the amount contributed for the taxable year by the employer to or under such plan, over
(ii)
the amount allowable as a deduction under section 404 for such contributions (determined without regard to subsection (e) thereof), and
(B)
the amount determined under this subsection for the preceding taxable year reduced by the sum of—
(i)
the portion of the amount so determined returned to the employer during the taxable year, and
(ii)
the portion of the amount so determined deductible under section 404 for the taxable year (determined without regard to subsection (e) thereof).
(2)

Ordering rule for section 404

For purposes of paragraph (1), the amount allowable as a deduction under section 404 for any taxable year shall be treated as—
(A)
first from carryforwards to such taxable year from preceding taxable years (in order of time), and
(B)
then from contributions made during such taxable year.
(3)

Contributions which may be returned to employer

In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account any contribution for such taxable year which is distributed to the employer in a distribution described in section 4980(c)(2)(B)(ii) if such distribution is made on or before the last day on which a contribution may be made for such taxable year under section 404(a)(6).

(4)

Special rule for self-employed individuals

For purposes of paragraph (1), if—
(A)
the amount which is required to be contributed to a plan under section 412 on behalf of an individual who is an employee (within the meaning of section 401(c)(1)), exceeds
(B)
the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established,
such excess shall be treated as an amount allowable as a deduction under section 404.
(5)

Pre-1987 contributions

The term “nondeductible contribution” shall not include any contribution made for a taxable year beginning before .

(6)

Exceptions

In determining the amount of nondeductible contributions for any taxable year, there shall not be taken into account—
(A)
so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed the amount of contributions described in section 401(m)(4)(A), or
(B)
so much of the contributions to a simple retirement account (within the meaning of section 408(p)), a simple plan (within the meaning of section 401(k)(11)), or a simplified employee pension (within the meaning of section 408(k)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer.
1
1 See References in Text note below.
For purposes of subparagraph (A), the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to a defined benefit plan and then to amounts described in subparagraph (A). Subparagraph (B) shall not apply to contributions made on behalf of the employer or a member of the employer’s family (as defined in section 447(e)(1)).
(7)

Defined benefit plan exception

In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431(c)(6)). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year.

(d)

Definitions

For purposes of this section—
(1)

Qualified employer plan

(A)

In general

The term “qualified employer plan” means—
(i)
any plan meeting the requirements of section 401(a) which includes a trust exempt from tax under section 501(a),
(ii)
an annuity plan described in section 403(a),
(iii)
any simplified employee pension (within the meaning of section 408(k)), and
(iv)
any simple retirement account (within the meaning of section 408(p)).
(B)

Exemption for governmental and tax exempt plans

The term “qualified employer plan” does not include a plan described in subparagraph (A) or (B) of section 4980(c)(1).

(2)

Employer

In the case of a plan which provides contributions or benefits for employees some or all of whom are self-employed individuals within the meaning of section 401(c)(1), the term “employer” means the person treated as the employer under section 401(c)(4).

Pub. L. 99–514, title XI, § 1131(c)(1)100 Stat. 2477Pub. L. 100–647, title I, § 1011A(e)(1)102 Stat. 3477Pub. L. 103–465, title VII, § 755(a)108 Stat. 5023Pub. L. 104–188, title I, § 1421(b)(9)(D)110 Stat. 1798Pub. L. 105–34, title XV, § 1507(a)111 Stat. 1067Pub. L. 107–16, title VI115 Stat. 103Pub. L. 108–311, title IV118 Stat. 1188Pub. L. 109–280, title I, § 114(e)(5)120 Stat. 855Pub. L. 117–328, div. T, title I, § 118(a)136 Stat. 5302(Added , , ; amended , (2), title II, § 2005(a)(1), , , 3610; , , ; , , ; , , ; , §§ 616(b)(2)(B), 637(a), (b), 652(b), 653(a), , , 118, 130; , §§ 404(c), 408(b)(9), , , 1193; , title VIII, § 803(c), , , 996; , , .)

Editorial Notes

References in Text

Pub. L. 115–97, title I, § 13102(a)(5)(C)131 Stat. 2103Section 447(e), referred to in subsec. (c)(6), was repealed and provisions were redesignated as section 447(e) which do not relate to members of the employer’s family by , , .

Prior Provisions

Pub. L. 93–406, title II, § 2001(f)(1)88 Stat. 955Pub. L. 94–455, title XIX, § 1906(b)(13)(A)90 Stat. 1834Pub. L. 97–34, title III, § 312(e)(3)95 Stat. 285Pub. L. 97–448, title I, § 103(c)(10)(B)96 Stat. 2377Pub. L. 98–369, div. A, title IV, § 491(d)(40)98 Stat. 851Pub. L. 97–248, title II, § 237(c)(1)96 Stat. 511A prior section, added , , ; amended , , ; , , ; , , ; , , , related to tax on excess contributions for self-employed individuals, prior to repeal applicable to years beginning after , by , , .

Amendments

Pub. L. 117–3282022—Subsec. (c)(6)(B). substituted “408(p)),” for “408(p)) or” and inserted “, or a simplified employee pension (within the meaning of section 408(k))” after “401(k)(11))”.

Pub. L. 109–280, § 803(c)2006—Subsec. (c)(6)(A). , amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “so much of the contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed the greater of—

“(i) the amount of contributions not in excess of 6 percent of compensation (within the meaning of section 404(a) and as adjusted under section 404(a)(12)) paid or accrued (during the taxable year for which the contributions were made) to beneficiaries under the plans, or

“(ii) the amount of contributions described in section 401(m)(4)(A), or”.

Pub. L. 109–280, § 114(e)(5)Subsec. (c)(7). , substituted “except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431(c)(6))” for “except to the extent that such contributions exceed the full-funding limitation (as defined in section 412(c)(7), determined without regard to subparagraph (A)(i)(I) thereof)”.

Pub. L. 108–311, § 408(b)(9)Pub. L. 107–16, § 652(b)(3)2004—Subsec. (c)(6). , amended directory language of . See 2001 Amendment note below.

Pub. L. 108–311, § 404(c)Subsec. (c)(6)(A)(ii). , amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the sum of—

“(I) the amount of contributions described in section 401(m)(4)(A), plus

“(II) the amount of contributions described in section 402(g)(3)(A), or”.

Pub. L. 107–16, § 652(b)(4)2001—Subsec. (c)(6). , substituted “Subparagraph (B)” for “Subparagraph (C)” in concluding provisions.

Pub. L. 107–16, § 652(b)(3)Pub. L. 108–311, § 408(b)(9), as amended by , substituted “subparagraph (A)” for “subparagraph (B)” in two places in concluding provisions.

Pub. L. 107–16, § 652(b)(2), in concluding provisions, struck out first sentence which read as follows: “If 1 or more defined benefit plans were taken into account in determining the amount allowable as a deduction under section 404 for contributions to any defined contribution plan, subparagraph (B) shall apply only if such defined benefit plans are described in section 404(a)(1)(D).”

Pub. L. 107–16, § 637(b), in concluding provisions, inserted at end “Subparagraph (C) shall not apply to contributions made on behalf of the employer or a member of the employer’s family (as defined in section 447(e)(1)).”

Pub. L. 107–16, § 652(b)(1)Subsec. (c)(6)(A). , redesignated subpar. (B) as (A) and struck out former subpar. (A) which read as follows: “contributions that would be deductible under section 404(a)(1)(D) if the plan had more than 100 participants if—

“(i) the plan is covered under section 4021 of the Employee Retirement Income Security Act of 1974, and

“(ii) the plan is terminated under section 4041(b) of such Act on or before the last day of the taxable year,”.

Pub. L. 107–16, § 637(a), struck out “and” at end.

Pub. L. 107–16, § 652(b)(1)Subsec. (c)(6)(B). , redesignated subpar. (C) as (B). Former subpar. (B) redesignated (A).

Pub. L. 107–16, § 637(a), substituted “, or” for period at end.

Pub. L. 107–16, § 616(b)(2)(B)Subsec. (c)(6)(B)(i). , substituted “(within the meaning of section 404(a) and as adjusted under section 404(a)(12))” for “(within the meaning of section 404(a))”.

Pub. L. 107–16, § 652(b)(1)Subsec. (c)(6)(C). , redesignated subpar. (C) as (B).

Pub. L. 107–16, § 637(a), added subpar. (C).

Pub. L. 107–16, § 653(a)Subsec. (c)(7). , added par. (7).

Pub. L. 105–341997—Subsec. (c)(6)(B). amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “contributions to 1 or more defined contribution plans which are not deductible when contributed solely because of section 404(a)(7), but only to the extent such contributions do not exceed 6 percent of compensation (within the meaning of section 404(a)) paid or accrued (during the taxable year for which the contributions were made) to beneficiaries under the plans.”

Pub. L. 104–1881996—Subsec. (d)(1)(A)(iv). added cl. (iv).

Pub. L. 103–4651994—Subsec. (c)(6). added par. (6).

Pub. L. 100–647, § 1011A(e)(1)1988—Subsec. (c). , amended subsec. (c) generally, revising and restating as pars. (1) to (4) provisions of former pars. (1) and (2).

Pub. L. 100–647, § 2005(a)(1)Subsec. (c)(4), (5). , added par. (4) and redesignated former par. (4) as (5).

Pub. L. 100–647, § 1011A(e)(2)Subsec. (d)(1). , amended par. (1) generally. Prior to amendment, par. (1) read as follows: “The term ‘qualified employer plan’ means—

“(A) any plan meeting the requirements of section 401(a) which includes a trust exempt from the tax under section 501(a),

“(B) an annuity plan described in section 403(a), and

“(C) any simplified employee pension (within the meaning of section 408(k)).”

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–328, div. T, title I, § 118(b)136 Stat. 5302

“(1)

In general .—

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act [].
“(2)

No inference .—

Nothing in the amendments made by this section shall be construed to infer the proper treatment under section 4972(c)(6) of the Internal Revenue Code of 1986 of nondeductible contributions to which the amendments made by this section [amending this section] do not apply.”
, , , provided that:

Effective Date of 2006 Amendment

section 114(e)(5) of Pub. L. 109–280section 114(g) of Pub. L. 109–280Pub. L. 110–458section 401 of this titleAmendment by applicable to taxable years beginning after 2007, but only with respect to plan years beginning after 2007 which end with or within any such taxable year, see , as added by , set out as a note under .

section 803(c) of Pub. L. 109–280section 803(d) of Pub. L. 109–280section 404 of this titleAmendment by applicable to contributions for taxable years beginning after , see , set out as a note under .

Effective Date of 2004 Amendment

section 404(c) of Pub. L. 108–311Pub. L. 107–16section 404(f) of Pub. L. 108–311section 45A of this titleAmendment by effective as if included in the provision of to which such amendment relates, see , set out as a note under .

Effective Date of 2001 Amendment

section 616(b)(2)(B) of Pub. L. 107–16section 616(c) of Pub. L. 107–16section 404 of this titleAmendment by applicable to years beginning after , see , set out as a note under .

Pub. L. 107–16, title VI, § 637(d)115 Stat. 118

“The amendments made by this section [amending this section] shall apply to taxable years beginning after .”
, , , provided that:

section 652(b) of Pub. L. 107–16section 652(c) of Pub. L. 107–16section 404 of this titleAmendment by applicable to plan years beginning after , see , set out as a note under .

Pub. L. 107–16, title VI, § 653(b)115 Stat. 130

“The amendment made by this section [amending this section] shall apply to years beginning after .”
, , , provided that:

Effective Date of 1997 Amendment

Pub. L. 105–34, title XV, § 1507(b)111 Stat. 1067

“The amendments made by this section [amending this section] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 1996 Amendment

Pub. L. 104–188section 1421(e) of Pub. L. 104–188section 72 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1994 Amendment

Pub. L. 103–465, title VII, § 755(b)108 Stat. 5024

“(1)

Section 4972(c)(6)(a) .—

Section 4972(c)(6)(A) of the Internal Revenue Code of 1986 (as added by this section) shall apply to taxable years ending on or after the date of enactment of this Act [].
“(2)

Section 4972(c)(6)(b) .—

Section 4972(c)(6)(B) of such Code (as added by this section) shall apply to taxable years ending on or after .”
, , , provided that:

Effective Date of 1988 Amendment

Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by section 1011A(e)(1), (2) of effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

section 2005(a)(1) of Pub. L. 100–647section 1131(c) of Pub. L. 99–514section 2005(e) of Pub. L. 100–647section 404 of this titleAmendment by effective as if included in the amendment made by , see , as amended, set out as a note under .

Effective Date

section 1131(d) of Pub. L. 99–514section 404 of this titleSection applicable to taxable years beginning after , with special rules in case of plans maintained pursuant to collective bargaining agreements, see , as amended, set out as an Effective Date of 1986 Amendment note under .

Construction of 2001 Amendment

Pub. L. 107–16, title VI, § 637(c)115 Stat. 118

“Nothing in the amendments made by this section [amending this section] shall be construed to infer the proper treatment of nondeductible contributions under the laws in effect before such amendments.”
, , , provided that:

Pub. L. 109–280Applicability of Amendments by Subtitles A and B of Title I of

Pub. L. 109–280Pub. L. 109–280section 401 of this titleFor special rules on applicability of amendments by subtitles A (§§ 101–108) and B (§§ 111–116) of title I of to certain eligible cooperative plans, PBGC settlement plans, and eligible government contractor plans, see sections 104, 105, and 106 of , set out as notes under .

Increase in Amount for Plan Termination Insurance Under Employee Retirement Insurance Security Act of 1974

Pub. L. 100–647, title I, § 1011A(e)(5)102 Stat. 3478

29 U.S.C. 1301“In the case of any taxable year beginning in 1987, the amount under section 4972(c)(1)(A)(ii) of the 1986 Code for a plan to which title IV of the Employee Retirement Income Security Act of 1974 [ et seq.] applies shall be increased by the amount (if any) by which, as of the close of the plan year with or within which such taxable year begins—
“(A)
the liabilities of such plan (determined as if the plan had terminated as of such time), exceed
“(B)
the assets of such plan.”
, , , provided that:

Plan Amendments Not Required Until January 1, 1998

Pub. L. 104–188section 1465 of Pub. L. 104–188section 401 of this titleFor provisions directing that if any amendments made by subtitle D [§§ 1401–1465] of title I of 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 , see , set out as a note under .

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor 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 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 , see , as amended, set out as a note under .