76 STAT. 828.

to which the plan is established, the term 'prohibited transaction' also means any transaction in which such trust, directly or indirectly

"(A) lends any part of the corpus or income of the trust to; "(B) pays any compensation for personal services rendered to the trust to;

"(C) makes any part of its services available on a preferential basis to; or

"(D) acquires for the trust any property from, or sells any property to;

any person described in subsection (c) or to any such owneremployee, a member of the family (as defined in section 267 (c)

(4)) of any such owner-employee, or a corporation controlled 63A Stat. 79. by any such owner-employee through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. "(2) SPECIAL RULE FOR LOANS. For purposes of the application of paragraph (1) (A), the following rules shall apply with respect to a loan made before the date of the enactment of this subsection which would be a prohibited transaction if made in a taxable year beginning after December 31, 1962:

"(A) If any part of the loan is repayable prior to December 31, 1965, the renewal of such part of the loan for a period not extending beyond December 31, 1965, on the same terms, shall not be considered a prohibited transaction.

"(B) If the loan is repayable on demand, the continuation of the loan beyond December 31, 1965, shall be considered a prohibited transaction."

SEC. 7. OTHER SPECIAL RULES, TECHNICAL CHANGES, AND ADMIN

ISTRATIVE PROVISIONS.

(a) RETIREMENT INCOME CREDIT.-Section 37 (c) (1) of the Internal

Revenue Code of 1954 (relating to definition of retirement income) is 26 USC 37. amended

(1) by striking out subparagraph (A) and inserting in lieu thereof the following:

"(A) pensions and annuities (including, in the case of an individual who is, or has been, an employee within the meaning of section 401 (c) (1), distributions by a trust described in section 401(a) which is exempt from tax under section 501 (a)),”; and

(2) by striking out "and" at the end of subparagraph (C), by striking out "or" at the end of subparagraph (D) and inserting in lieu thereof "and", and by adding after subparagraph (D) the following new subparagraph:

66

Ante, p. 811. 68A Stat. 134.

68A Stat. 163.

"(E) bonds described in section 405 (b) (1) which are Ante, p. 826. received under a qualified bond purchase plan described in section 405 (a) or in a distribution from a trust described in section 401 (a) which is exempt from tax under section 501 (a),

or".

(b) ADJUSTED GROSS INCOME.-Section 62 of the Internal Revenue

Code of 1954 (relating to the definition of adjusted gross income) is 26 USC 62. amended by inserting after paragraph (6) the following new paragraph:

“(7) PENSION, PROFIT-SHARING, ANNUITY, AND BOND PURCHASE PLANS OF SELF-EMPLOYED INDIVIDUALS.-In the case of an individual who is an employee within the meaning of section 401

(c) (1), the deductions allowed by section 404 and section 405 (c) 68A Stat. 138. to the extent attributable to contributions made on behalf of such individual."

26 USC 101.

76 STAT. 829.

68A Stat. 137.

Ante, p. 811.

26 USC 104.

68A Stat. 134, 163.

68A Stat. 138.

26 USC 105.

26 USC 172.

Ante, p. 826.

26 USC 805.

68A Stat. 134. 68A Stat. 137.

26 USC 1361.

(c) DEATH BENEFITS.-Section 101 (b) of the Internal Revenue Code of 1954 (relating to employees' death benefits) is amended(1) by striking out clause (ii) of paragraph (2) (B) and inserting in lieu thereof the following:

"(ii) under an annuity contract under a plan described in section 403 (a), or"; and

(2) by adding at the end thereof the following new paragraph: (3) SELF-EMPLOYED INDIVIDUAL NOT CONSIDERED AN EMPLOYEE. For purposes of this subsection, the term 'employee' does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals). (d) AMOUNTS RECEIVED THROUGH ACCIDENT OR HEALTH INSURANCE.-Section 104(a) of the Internal Revenue Code of 1954 (relating to compensation for injuries or sickness) is amended by adding at the end thereof the following new sentence:

"For purposes of paragraph (3), in the case of an individual who is, or has been, an employee within the meaning of section 401 (c) (1) (relating to self-employed individuals), contributions made on behalf of such individual while he was such an employee to a trust described in section 401(a) which is exempt from tax under section 501 (a), or under a plan described in section 403 (a), shall, to the extent allowed as deductions under section 404, be treated as contributions by the employer which were not includible in the gross income of the employee."

(e) AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH PLANS.— Section 105 of the Internal Revenue Code of 1954 (relating to amounts received under accident and health plans) is amended by adding at the end thereof the following new subsection:

"(g) SELF-EMPLOYED INDIVIDUAL NOT CONSIDERED AN EMPLOYEE.— For purposes of this section, the term 'employee' does not include an individual who is an employee within the meaning of section 401 (c) (1) (relating to self-employed individuals).'

(f) NET OPERATING LOSS DEDUCTION.-Section 172(d) (4) of the Internal Revenue Code of 1954 (relating to nonbusiness deductions of taxpayers other than corporations) is amended

(1) by striking out "and" at the end of subparagraph (B); (2) by striking out the period at the end of subparagraph (C) and inserting "; and"; and

(3) by adding after subparagraph (C) the following new subparagraph:

"(D) any deduction allowed under section 404 or section 405 (c) to the extent attributable to contributions which are made on behalf of an individual who is an employee within the meaning of section 401 (c) (1) shall not be treated as attributable to the trade or business of such individual." (g) CERTAIN LIFE INSURANCE RESERVES.-Section 805 (d) (1) of the Internal Revenue Code of 1954 (relating to pension plan reserves) is amended

(1) by striking out in subparagraph (B) "meeting the requirements of section 401 (a) (3), (4), (5), and (6) or" and inserting in lieu thereof "described in section 403 (a), or plans meeting"; and (2) by striking out in subparagraph (C) "and (6)" and inserting in lieu thereof "(6), (7), and (8)”.

(h) UNINCORPORATED BUSINESSES ELECTING TO BE TAXED AS CORPORATIONS.-Section 1361 (d) of the Internal Revenue Code of 1954 (relating to unincorporated business enterprises electing to be taxed as domestic corporations) is amended by inserting before the period at the end thereof the following: "other than an employee within the meaning of section 401 (c) (1) (relating to self-employed

76 STAT. 830.

individuals), or for purposes of section 405 (relating to qualified bond Ante, p. 826. purchase plans) other than an employee described in section 405 (f)".

(i) ESTATE TAX EXEMPTION OF EMPLOYEES' ANNUITIES.-Section 2039 of the Internal Revenue Code of 1954 (relating to exemption 26 USC 2039. from the gross estate of annuities under certain trusts and plans) is amended

(1) by striking out in subsection (c) (2) "met the requirements

of section 401(a) (3), (4), (5), and (6)" and inserting "was a 68A Stat. 134. plan described in section 403 (a)"; and

68A Stat. 137.

(2) by adding at the end of subsection (c) the following new sentence: "For purposes of this subsection, contributions or payments on behalf of the decedent while he was an employee within the meaning of section 401 (c) (1) made under a trust or plan Ante, p. described in paragraph (1) or (2) shall be considered to be contributions or payments made by the decedent."

(j) GIFT TAX EXEMPTION OF EMPLOYEES' ANNUITIES.-Section 2517

811.

of the Internal Revenue Code of 1954 (relating to exclusion from gift 26 USC 2517. tax in case of certain annuities under qualified plans) is amended— (1) by striking out in subsection (a) (2) "met the requirements of section 401 (a) (3), (4), (5), and (6)" and inserting in lieu thereof "was a plan described in section 403 (a)"; and

(2) by adding at the end of subsection (b) the following new sentence: "For purposes of this subsection, payments or contributions on behalf of an individual while he was an employee within the meaning of section 401 (c) (1) made under a trust or plan described in subsection (a) (1) or (2) shall be considered to be payments or contributions made by the employee."

(k) FEDERAL UNEMPLOYMENT TAX ACT.-Section 3306 (b) (5) of the Internal Revenue Code of 1954 (relating to definition of wages) is 26 USC 3306. amended by striking out subparagraph (B) and inserting in lieu thereof the following new subparagraphs:

"(B) under or to an annuity plan which, at the time of such payment, is a plan described in section 403 (a), or

(C) under or to a bond purchase plan which, at the time of such payment, is a qualified bond purchase plan described in section 405 (a);".

Ante, p. 826.

(1) WITHHOLDING OF INCOME TAX.-Section 3401(a)(12) of the Internal Revenue Code of 1954 (relating to definition of wages) is 26 USC 3401. amended by striking out subparagraph (B) and inserting in lieu thereof the following new subparagraphs:

"(B) under or to an annuity plan which, at the time of such payment, is a plan described in section 403 (a); or

"(C) under or to a bond purchase plan which, at the time of such payment, is a qualified bond purchase plan described in section 405 (a)."

(m) INFORMATION REQUIREMENTS.

(1) IN GENERAL.-Subpart B of part III of subchapter A of

chapter 61 of the Internal Revenue Code of 1954 (relating to 26 USC 6041information concerning transactions with other persons) is 6046. amended by adding after section 6046 the following new section: "SEC. 6047. INFORMATION RELATING TO CERTAIN TRUSTS AND ANNUITY AND BOND PURCHASE PLANS.

"(a) TRUSTEES AND INSURANCE COMPANIES.-The trustee of a trust described in section 401(a) which is exempt from tax under section

501(a) to which contributions have been paid under a plan on behalf 68A Stat. 163. of any owner-employee (as defined in section 401(c)(3)), and each Ante, p. 812. insurance company or other person which is the issuer of a contract

purchased by such a trust, or purchased under a plan described in section 403 (a), contributions for which have been paid on behalf of

86-535 - 72 - 37

Ante, p. 812.

68A Stat. 134. 68A Stat. 163.

68A Stat. 137.

Ante, p. 826.

Infra.
26 USC 7207.

Supra.

76 STAT. 831.

any owner-employee, shall file such returns (in such form and at such times), keep such records, make such identification of contracts and funds (and accounts within such funds), and supply such information, as the Secretary or his delegate shall by forms or regulations prescribe.

"(b) OWNER-EMPLOYEES.-Every individual on whose behalf contributions have been paid as an owner-employee (as defined in section ) (3))·

10(1) to a trust described in section 401 (a) which is exempt

from tax under section 501 (a), or

"(2) to an insurance company or other person under a plan described in section 403 (a), shall furnish the trustee, insurance company, or other person, as the case may be, such information at such times and in such form and manner as the Secretary or his delegate shall prescribe by forms or regulations.

(c) EMPLOYEES UNDER QUALIFIED BOND PURCHASE PLANS.-Every individual in whose name a bond described in section 405 (b) (1) is purchased by his employer under a qualified bond purchase plan described in section 405 (a), or by a trust described in section 401(a) which is exempt from tax under section 501 (a), shall furnish"(1) to his employer or to such trust, and

"(2) to the Secretary (or to such person as the Secretary may by regulations prescribe),

such information as the Secretary or his delegate shall by forms or regulations prescribe.

"(d) CROSS REFERENCE.

"For criminal penalty for furnishing fraudulent information, see section 7207."

(2) CLERICAL AMENDMENT.-The table of sections for such subpart B is amended by adding after the reference to section 6046 the following:

"Sec. 6047. Information relating to certain trusts and annuity and bond purchase plans."

(3) PENALTY.-Section 7207 of the Internal Revenue Code of 1954 (relating to fraudulent returns, statements, or other documents) is amended by adding at the end thereof the following new sentence: "Any person required pursuant to section 6047 (b) or (c) to furnish any information to the Secretary or any other person who willfully furnishes to the Secretary or such other person any information known by him to be fraudulent or to be false as to any material matter shall be fined not more than $1,000, or imprisoned not more than 1 year, or both."

SEC. 8. EFFECTIVE DATE.

The amendments made by this Act shall apply to taxable years beginning after December 31, 1962.

Approved October 10, 1962.

To extend for one year the period during which responsibility for the placement and foster care of dependent children, under the program of aid to families with dependent children under title IV of the Social Security Act, may be exercised by a public agency other than the agency administering such aid under the State plan.

Extension.

Be it enacted by the Senate and House of Representatives of the Dependent United States of America in Congress assembled, That section 155 (b) children, aid. of the Public Welfare Amendments of 1962 is amended(1) by striking out “June 30, 1963” and inserting in lieu thereof "June 30, 1964"; and

(2) by striking out "March 1, 1963" and inserting in lieu thereof "December 31, 1963”. Approved June 29, 1963.

76 Stat. 207.

42 USC 608 note.