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PUBLIC LAW 87-109-JULY 26, 1961

[76 S T A T.

Public Law 87-109 July 26, 1961 [H. R. 929]

" ^ ^^"^ To amend the Internal Revenue Code of 1954 to permit the prepaid dues income of certain membership organizations to be included in gross income for the taxable years to which the dues relate.

Be it enacted by the /Senate and House of Representatives of the MembVhT*'* - ^^^^^^ /States of America in Congress assembled, That (a) subpart ganiMUons.^ *"' B of part II of Subchapter E of chapter 1 of the Internal Revenue 68A Stat. 152. Code of 1954 (relating to taxable years for which items of gross income are included) is amended by adding at the end thereof the aeq. following new section: "SEC. 456. PREPAID DUES INCOME OF CERTAIN MEMBERSHIP ORGANIZATIONS. " (a) YEAR I N W H I C H INCLUDED.—Prepaid dues income to which this section applies shall be included in gross income for the taxable years during which the liability described in subsection (e)(2) exists. "(b) W H E R E TAXPAYER'S LIABILITY CEASES.—In the case of any prepaid dues income to which this section applies— "(1) I f the liability described in subsection (e)(2) ends, then so much of such income as was not includible in gross income under subsection (a) for preceding taxable years shall be included in gross income for the taxable year in which the liability ends. "(2) I f the taxpayer ceases to exist, then so much of such income as was not includible in gross income under subsection (a) for preceding taxable years shall be included in gross income for the taxable year in which such cessation of existence occurs. " (c) PREPAID DUES INCOME TO W H I C H T H I S SECTION A P P L I E S — "(1) ELECTION or BENEFITS.—This section shall apply to pre-

paid dues income if and only if the taxpayer makes an election under this section with respect to the trade or business in connection with which such income is received. The election shall be made in such manner as the Secretary or his delegate may by regulations prescribe. No election may be made with respect to a trade or business if in computing taxable income the cash receipts and disbursements method of accounting is used with respect to such trade or business. " (2) SCOPE or ELECTION.—An election made under this section shall apply to all prepaid dues income received in connection with the trade or business with respect to which the taxpayer has made the election; except that the taxpayer may, to the extent permitted under regulations prescribed by the Secretary or his delegate, include in gross income for the taxable year of receipt the entire amount of any prepaid dues income if the liability from which it arose is to end within 12 months after the date of receipt. Except as provided in subsection (d), an election made under this section shall not apply to any prepaid dues income received before the first taxable year for which the election is made. " (3) W H E N ELECTION MAY BE MADE.— " (A) W I T H CONSENT.—A taxpayer may, with the consent

of the Secretary or his delegate, make an election under this section at any time. " (B) WITHOUT CONSENT.—A taxpayer may, without the

consent of the Secretary or his delegate, make an election under this section for its first taxable year (i) which begins after December 31, 1960, and (ii) in which it receives pre-

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