Page:United States Statutes at Large Volume 90 Part 2.djvu/458

 90 STAT. 1926

26 USC 120.

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PUBLIC LAW 94-455—OCT. 4, 1976

(b) REPORT.—The Joint Committee on Taxation shall submit to the Committee on Finance of the Senate and to the Committee on W a y s and Means of the House of Representatives a final report of its study and investigation together with its recommendations, including recommendations for legislation, as it deems advisable. (c) REPORTING D A T E. — The final report called for in subsection (b) of this section shall be submitted no later than September 30, 1977., SEC. 2134. PREPAID LEGAL EXPENSES. (a) E X C L U S I O N. — Part III of subchapter B of chapter 1 is amended by inserting after section 119 the following new section: "SEC. 120. AMOUNTS RECEIVED UNDER QUALIFIED GROUP LEGAL SERVICES PLANS. " (a) EXCLUSION BY EMPLOYEE FOR CONTRIBUTIONS AND LEGAL SERVICES PROVIDED BY EMPLOYER.—Gross income of an employee, his spouse,

or his dependents, does not include— " (1) amounts contributed by an employer on behalf of an employee, h i s spouse, or his dependents under a qualified group legal services plan (as defined in subsection (b)); or " (2) the value of legal services provided, or amounts paid for legal services, under a qualified g r o u p legal services plan (as defined i n subsection (b)) to, or with respect to, an employee, his spouse, or his dependents. "(b)

QUALIFIED GROUP LEGAL SERVICES P L A N. — For purposes of

this section, a qualified group legal services plan is a separate written plan of an employer for the exclusive benefit of his employees or their spouses or dependents to provide such employees, spouses^ or dependents with specified benefits consisting of personal legal services through prepayment of, or provision in advance for, legal fees in whole or in part by the employer, if the plan meets the requirements of subsection (c). " (c) REQUIREMENTS.—

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" (1) DISCRIMINATION.—The contributions or benefits provided under the plan shall not discriminate in favor of employees who are officers, shareholders, self-employed individuals, or highly compensated. " (2) ELIGIBILITY.—The plan shall benefit employees who qualify under a classification set u p by the employer and found by the Secretary not to be discriminatory in favor of employees who are described in paragraph (1). For purposes of this paragraph, there shall be excluded from consideration employees not included in the plan who a r e included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that group legal services plan benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. " (3) CONTRIBUTION LIMITATION.—Not more than 25 percent of

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the amounts contributed under the plan during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer. " (4) NOTIFICATION.—The plan shall give notice to the Secretary, i n such manner as the Secretary may by regulations prescribe, that it is applying for recognition of the status of a qualified group legal services plan.

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