Internal Revenue Code – Section 126

Sec. 126. Certain cost-sharing payments 

-STATUTE-

(a) General rule

Gross 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 great plains conservation program authorized by section

16 (!1) of the Soil Conservation and Domestic Policy Act (16

U.S.C. 590p(b)).

 

(7) 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.).

(8) The forestry incentives program authorized by section 4 of

the Cooperative Forestry Assistance Act of 1978 (16 U.S.C. 2103).

(9) 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).

(10) 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 portion

For purposes of this section -

(1) In general

The 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).

 

-SOURCE-

(Added Pub. L. 95-600, title V, Sec. 543(a), Nov. 6, 1978, 92 Stat.

2888; amended Pub. L. 96-222, title I, Sec. 105(a)(7)(A), (C), (E),

Apr. 1, 1980, 94 Stat. 220, 221.)

 

-REFTEXT-

REFERENCES IN TEXT

The Water Bank Act, referred to in subsec. (a)(3), is Pub. L. 91-

559, Dec. 19, 1970, 84 Stat. 1468, as amended, which is classified

generally to chapter 29 (Sec. 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, as amended.

Title IV of the Agricultural Credit Act of 1978 is classified

generally to chapter 42 (Sec. 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), (7), is act Apr. 27, 1935, ch. 85, 49 Stat. 163, as

amended, which is classified generally to chapter 3B (Sec. 590a et

seq.) of Title 16, Conservation. For complete classification of

this Act to the Code, see section 590q of Title 16 and Tables.

Section 16 of the Soil Conservation and Domestic Policy Act,

referred to in subsec. (a)(6), probably means section 16 of the

Soil Conservation and Domestic Allotment Act, which was classified

to section 590p of Title 16, Conservation, prior to repeal by Pub.

L. 104-127, title III, Sec. 336(b)(1), Apr. 4, 1996, 110 Stat.

1006.

The Bankhead-Jones Farm Tenant Act, referred to in subsec.

(a)(7), is act July 22, 1937, ch. 517, 50 Stat. 522, as amended,

which is classified generally to chapter 33 (Sec. 1000 et seq.) of

Title 7, Agriculture. For complete classification of this Act to

the Code, see section 1000 of Title 7 and Tables.

 

 

-MISC1-

PRIOR PROVISIONS

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

 

AMENDMENTS

1980 - Subsec. (a). Pub. L. 96-222, Sec. 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, Sec. 105(a)(7)(A), inserted

provisions relating to payments not chargeable to capital account.

Subsec. (c). Pub. L. 96-222, Sec. 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, Sec. 105(a)(7)(A), added

subsecs. (d) and (e).

 

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

Section 543(d) of Pub. L. 95-600 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."

 

-FOOTNOTE-

(!1) See References in Text note below.

 

 

-End-