APPENDIX III: CHAPTER 1, SUBCHAPTER Q, PART I (ORIGINAL) 1 (Readjustment Between Years With Respect to Income) Sections 1301-1304, 68A Stat. 334-336 PART I-INCOME ATTRIBUTABLE TO SEVERAL TAXABLE YEARS Sec. 1301. Compensation from an employment. Sec. 1302. Income from an invention or artistic work. Sec. 1303. Income from back pay. Sec. 1304. Rules applicable to this part. SEC. 1301. COMPENSATION FROM AN EMPLOYMENT. (a) LIMITATION ON TAX.-If an individual or partnership (1) engages in an employment as defined in subsection (b); and (2) the employment covers a period of 36 months or more (from the beginning to the completion of such employment); and (3) the gross compensation from the employment received or accrued in the taxable year of the individual or partnership is not less than 80 percent of the total compensation from such employment, then the tax attributable to any part of the compensation which is included in the gross income of any individual shall not be greater than the aggregate of the taxes attributable to such part had it been included in the gross income of such individual ratably over that part of the period which precedes the date of such receipt or accrual. (b) DEFINITION OF AN EMPLOYMENT. For purposes of this section, the term "an employment" means an arrangement or series of arrangements for the performance of personal services by an individual or partnership to effect a particular result, regardless of the number of sources from which compensation therefor is obtained. (c) RULE WITH RESPECT TO PARTNERS.-An individual who is a member of a partnership receiving or accruing compensation from an employment of the type described in subsection (a) shall be entitled to the benefits of that subsection only if the individual has been a member of the partnership continuously for a period of 36 months or the period of the employment immediately preceding the receipt or accrual. In such a case the tax attributable to the part of the compensation which is includible in the gross income of the individual shall not be greater than the aggregate of the taxes which would have been attributable to that part had it been included in the gross income of the individual ratably over the period in which it was earned or the period during which the individual continuously was a member of the partnership, whichever period is the shorter. For purposes of this subsection, a member of a partnership shall be deemed to have been a member of the partnership for any period, ending immediately prior to becoming such a member, in which he was an employee of such partnership, if during the taxable year he received or accrued compensation attributable to employment by the partnership during such period. SEC. 1302. INCOME FROM AN INVENTION OR ARTISTIC WORK. (a) LIMITATION ON TAX.-If— (1) an individual includes in gross income amounts in respect of a particular invention or artistic work created by the individual; and (2) the work on the invention or the artistic work covered a period of 24 months or more (from the beginning to the completion thereof); and (3) the amounts in respect of the invention or the artistic work includible in gross income for the taxable year are not less than 80 percent of the gross income in respect of such invention or artistic work in the taxable year plus the gross income therefrom in previous taxable years and the 12 months immediately succeeding the close of the taxable year, then the tax attributable to the part of such gross income of the taxable year which is not taxable as a gain from the sale or exchange of a capital asset held for more than 6 months shall not be greater than the aggregate of the taxes attributable to such part had it been received ratably over, in the case of an invention, that part of the period preceding the close of the taxable year or 60 months, whichever is shorter, or, in the case of an artistic work, that part of the period preceding the close of the taxable year but not more than 36 months. (b) DEFINITIONS.-For purposes of this section (1) INVENTION.-The term "invention" means a patent covering an invention of the individual. (2) ARTISTIC WORK.-The term "artistic work" means a literary, musical, or artistic composition or a copyright covering a literary, musical, or artistic composition. 1 Amendments to the original Part I of Subchapter Q of Chapter 1, as existing prior to its revision by P.L. 88–272, § 232(a), are set forth on pages 482 to 486 above. SEC. 1303. INCOME FROM BACK PAY. Appendix III-Continued (a) LIMITATION ON TAX.-If the amount of the back pay received or accrued by an individual during the taxable year exceeds 15 percent of the gross income of the individual for such year, the part of the tax attributable to the inclusion of such back pay in gross income for the taxable year shall not be greater than the aggregate of the increases in the taxes which would have resulted from the inclusion of the respective portions of such back pay in gross income for the taxable years to which such portions are respectively attributable, as determined under regulations prescribed by the Secretary or his delegate. (b) DEFINITION OF BACK PAY.-For purposes of this section, the term "back pay" means amounts includible in gross income under this subtitle which are one of the following— (1) Remuneration, including wages, salaries, retirement pay, and other similar compensation, which is received or accrued during the taxable year by an employee for services performed before the taxable year for his employer and which would have been paid before the taxable year except for the intervention of one of the following events: (A) bankruptcy or receivership of the employer; (B) dispute as to the liability of the employer to pay such remuneration, which is determined after the commencement of court proceedings; (C) if the employer is the United States, a State, a Territory, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any of the foregoing, lack of funds appropriated to pay such remuneration; or (D) any other event determined to be similar in nature under regulations prescribed by the Secretary or his delegate. (2) Wages or salaries which are received or accrued during the taxable year by an employee for services performed before the taxable year for his employer and which constitute retroactive wage or salary increases ordered, recommended, or approved by any Federal or State agency, and made retroactve to any period before the taxable year. (3) Payments which are received or accrued during the taxable year as the result of an alleged violation by an employer of any State or Federal law relating to labor standards or practices, and which are determined under regulations prescribed by the Secretary or his delegate to be attributable to a prior taxable year. SEC. 1304. RULES APPLICABLE TO THIS PART. (a) FRACTIONAL PARTS OF A MONTH.-For purposes of this part, a fractional part of a month shall be disregarded unless it amounts to more than half a month, in which case it should be considered as a month. (b) TAX ON SELF-EMPLOYMENT INCOME.-This part shall be applied without regard to, and shall not affect, the tax imposed by chapter 2 relating to self-employment income. (c) COMPUTATION OF TAX ATTRIBUTABLE TO INCOME ALLOCATED TO PRIOR PERIOD.-For the purpose of computing the tax attributable to the amount of an item of gross income allocable under this part to a particular taxable year, such amount shall be considered income only of the person who would be required to include the item of gross income in a separate return filed for the taxable year in which such item was received or accrued. (d) EFFECTIVE DATE OF CERTAIN SUBSECTIONS.-Subsection (c) of section 1301 and subsection (c) of this section shall apply only to amounts received or accrued after March 1, 1954. Notwithstanding any other provision of this title, section 107 of the Internal Revenue Code of 1939 shall apply to amounts received or accrued as a partner on or before March 1, 1954, under this section and to the computation of tax on amounts received or accrued on or before March 1, 1954. APPENDIX IV—WAGE BRACKET WITHHOLDING (ORIGINAL) (Sec. 3402(c)(1)-68A Stat. 458-465) The following withholding tables were enacted as a part of the Internal Revenue Code of 1954 and were in effect from January 1, 1954, to March 4, 1964, inclusive. For the new tables enacted by P.L. 88-272, § 302(b), effective March 5, 1964, see pages 662 and following in the text above. (c) WAGE BRACKET WITHHOLDING.— (1) At the election of the employer with respect to any employee, the employer shall deduct and withhold upon the wages paid to such employee a tax determined in accordance with the following tables, which shall be in lieu of the tax required to be deducted and withheld under subsection (a): |