Page:United States Statutes at Large Volume 72 Part 1.djvu/1663

 72 S T A T. ]

PUBLIC LAW 85-866-SEPT. 2, 1958

" (B) such annuity contract is not subject to subsection (a), and " (C) the employee's rights under the contract are nonforfeitable, except for failure to pay future premiums, then amounts contributed by such employer for such annuity contract on or after such rights become nonforfeitable shall be excluded from the gross income of the employee for the taxable year to the extent that the aggregate of such amounts does not exceed the exclusion allowance for such taxable year. The employee shall include in his gross income the amounts received under such contract for the year received as provided in section 72 (relating to annuities) except that section 72(e)(3) shall not apply. "(2) EXCLUSION ALLOWANCE.—For purposes of this subsection, the exclusion allowance for any employee for the taxable year is an amount equal to the excess, if any, of— " (A) the amount determined by multiplying (i) 20 percent of his includible compensation, by (ii) the number of years of service, over " (B) the aggregate of the amounts contributed by the employer for annuity contracts and excludable from the gross income of the employee for any prior taxable year. "(3) INCLUDIBLE COMPENSATION.—For purposes of this subsection, the term 'includible compensation' means, in the case of any employee, the amount of compensation which is received from the employer described in section 501(c)(3) and exempt from tax under section 501(a), and which is includible in gross income (computed without regard to sections 105(d) and 911) for the most recent period (ending not later than the close of the taxable year) which under paragraph (4) may be counted as one year of service. Such term does not include any amount contributed by the employer for any annuity contract to which this subsection applies. ' (4) YEARS or SERVICE.—In determining the number of years of service for purposes of this subsection, there shall be included— " (A) one year for each full year during which the individual was a full-time employee of the organization purchasing the annuity for him, and " (B) a fraction of a year (determined in accordance with regulations prescribed by the Secretary or his delegate) for each full year during which such individual was a part-time employee of such organization and for each part of a year during which such individual was a full-time or part-time employee of such organization. I n no case shall the number of years of service be less than one. "(5)

APPLICATION TO MORE THAN ONE ANNUITY CONTRACT.—If

for any taxable year of the employee this subsection applies to 2 or more annuity contracts purchased by the employer, such contracts shall be treated as one contract. "(6)

FORFEITABLE RIGHTS WHICH BECOME NONFORFEITABLE.—

For purposes of this subsection and section 72(f) (relating to special rules for computing employees' contributions to annuity contracts), if rights of the employee under an annuity contract described in subparagraphs (A) and (B) of paragraph (1) change from forfeitable to nonforfeitable rights, then the amount (determined without regard to this subsection) includible in gross income by reason of such change shall be treated as an amount contributed by the employer for such annuity contract as of the time such rights become nonforfeitable."

1621

26 USC 72.

26 USC 501. 26 USC 105,911.

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