US Code

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

26 U.S.C. § 4977

Tax on certain fringe benefits provided by an employer

(a)

Imposition of tax

In the case of an employer to whom an election under this section applies for any calendar year, there is hereby imposed a tax for such calendar year equal to 30 percent of the excess fringe benefits.

(b)

Excess fringe benefits

For purposes of subsection (a), the term “excess fringe benefits” means, with respect to any calendar year—
(1)
the aggregate value of the fringe benefits provided by the employer during the calendar year which were not includible in gross income under paragraphs (1) and (2) of section 132(a), over
(2)
1 percent of the aggregate amount of compensation—
(A)
which was paid by the employer during such calendar year to employees, and
(B)
was includible in gross income for purposes of chapter 1.
(c)

Effect of election on section 132(a)

If—
(1)
an election under this section is in effect with respect to an employer for any calendar year, and
(2)
at all times on or after , and before the close of the calendar year involved, substantially all of the employees of the employer were entitled to employee discounts on goods or services provided by the employer in 1 line of business,
for purposes of paragraphs (1) and (2) of section 132(a) (but not for purposes of section 132(h)), all employees of any line of business of the employer which was in existence on , shall be treated as employees of the line of business referred to in paragraph (2).
(d)

Period of election

An election under this section shall apply to the calendar year for which made and all subsequent calendar years unless revoked by the employer.

(e)

Treatment of controlled groups

All employees treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.

(f)

Section to apply only to employment within the United States

Except as otherwise provided in regulations, this section shall apply only with respect to employment within the United States.

Pub. L. 98–369, div. A, title V, § 531(e)(1)98 Stat. 885Pub. L. 99–514, title XVIII, § 1853(c)(1)100 Stat. 2871Pub. L. 103–66, title XIII, § 13213(d)(3)(D)107 Stat. 474Pub. L. 104–188, title I, § 1704(t)(66)110 Stat. 1890(Added , , ; amended , (2), , ; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 104–1881996—Subsec. (c). substituted “section 132(h)” for “section 132(i)(2)” in closing provisions.

Pub. L. 103–661993—Subsec. (c). substituted “section 132(i)(2)” for “section 132(g)(2)” in closing provisions.

Pub. L. 99–514, § 1853(c)(1)1986—Subsec. (c)(2). , amended par. (2) generally. Prior to amendment, par. (2) read as follows: “as of , substantially all of the employees of the employer were entitled to employee discounts or services provided by the employer in 1 line of business,”.

Pub. L. 99–514, § 1853(c)(2)Subsec. (f). , added subsec. (f).

Statutory Notes and Related Subsidiaries

Effective Date of 1993 Amendment

Pub. L. 103–66section 13213(e) of Pub. L. 103–66section 62 of this titleAmendment by applicable to reimbursements or other payments in respect of expenses incurred after , see , set out as a note under .

Effective Date of 1986 Amendment

Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .

Effective Date

section 531(h) of Pub. L. 98–369section 132 of this titleSection effective , 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 .

Application of Subsection (c) of this Section to Agricultural Cooperatives Incorporated in 1964

Pub. L. 99–514, title XVIII, § 1853(c)(3)100 Stat. 2871

“For purposes of determining whether the requirements of section 4977(c) of the Internal Revenue Code of 1954 [now 1986] are met in the case of an agricultural cooperative incorporated in 1964, there shall not be taken into account employees of a member of the same controlled group as such cooperative which became a member during July 1980.”
, , , provided that: