Page 126

TITLE 26-INTERNAL REVENUE CODE SCHOLARSHIP PROGRAMS FOR MEMBERS OF THE UNIFORMED SERVICES Pub. L. 93-483, § 4. Oct. 26, 1974, 88 Stat. 1458, as amended Pub. L. 94-455, title XXI, § 2130, Oct. 4,1976, 90 Stat. 1922, provided that: "(a) In general.-Any amount received from appro- priated funds as a scholarship, including the value of contributed services and accommodations, by a member of a uniformed service who is receiving train- ing under the Armed Forces Health Professions Schol- arship Program (or any other program determined by the Secretary of the Treasury or his delegate to have substantially similar objectives) from an educational institution (as defined in section 151(e)(4) of the Inter- nal Revenue Code of 1954) [now section 170(b)(4)(A)(ii) of this title] shall be treated as a scholarship under section 117 of such Code [this sec- tion], whether that member is receiving training while on active duty or in an off-duty or inactive status, and without regard to whether a period of active duty is required of the member as a condition of receiving those payments. "(b) Definition of uniformed services.-For purposes of this section, the term 'uniformed service' has the meaning given it by section 101(3) of title 37, United States Code. "(c) Effective date.-The provisions of this section shall apply with respect to amounts received during calendar years 1973, 1974, and 1975, and, in the case of a member of a uniformed service receiving training in programs described in subsection (a) during calendar year 1976, with respect to amounts received during cal- endar years 1976, 1977, 1978, and 1979." CROSS REFEIENCES Prizes and awards as includible in gross income, see section 74 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 74, 1441, 4941 of this title. § 118. Contributions to the capital of a corporation (a) General rule In the case of a corporation, gross income does not include any contribution to the capital of the taxpayer. (b) Contributions in aid of construction (1) General rule For purposes of this section, the term "con- tribution to the capital of the taxpayer" in- cludes any amount of money or other proper- ty received from any person (whether or not a shareholder) by a regulated public utility which provides water or sewerage disposal services if- (A) such amount is a contribution in aid of construction, (B) where the contribution is in property which is other than water or sewerage dis- posal facilities, such amount meats the re- quirements of the expenditure rule of para- graph (2), and (C) such amounts (or any property ac- quired or constructed with such amounts) are not included in the taxpayer's rate base for rate-making purposes. (2) Expenditure rule An amount meets the requirements of this paragraph if- (A) an amount equal to such amount is expended for the acquisition or construc- tion of tangible property described in sec- tion 1231(b)- (i) which was the purpose motivating the contribution, and (ii) which is used predominantly in the trade or business of furnishing water or sewerage disposal services, (B) the expenditure referred to in subpar- agraph (A) occurs before the end of the second taxable year after the year in which such amount was received, and (C) accurate records are kept of the amounts contributed and expenditures made on the basis of the project for which the contribution was made and on the basis of the year of contribution or expenditure. (3) Definitions For purposes of this section- (A) Contribution in aid of construction The term "contribution in aid of construc- tion" shall be defined by regulations pre- scribed by the Secretary; except that such term shall not include amounts paid as cus- tomer connection fees (including amounts paid to connect the customer's property to a main water or sewer line and amounts paid as service charges for starting or stop- ping services). (B) Predominantly The term "predominantly" means 80 per- cent or more. (C) Regulated public utility The term "regulated public utility" has the meaning given such term by section 7701(a)(33); except that such term shall not include any such utility which is not re- quired to provide water or sewerage disposal services to members of the general public in its service area. (4) Disallowance of deductions and investment credit; adjusted basis Notwithstanding any other provision of this subtitle, no deduction or credit shall be al- lowed for, or by reason of, the expenditure which constitutes a contribution in aid of con- struction to which this subsection applies. The adjusted basis of any property acquired with contributions in aid of construction to which this subsection applies shall be zero. (c) Cross reference For basis of property acquired by a corporation through a contribution to its capital, see section 362. (Aug. 16, 1954, ch. 736, 68A Stat. 39; Oct. 4, 1976, Pub. L. 94-455, title XXI, §2120(a), 90 Stat. 1912.) AMENDMENTS 1976-Subsec. (b). Pub. L. 94-455, §2120(a), added subsec. (b). Former subsec. (b) redesignated (c). Subsec. (c). Pub. L. 94-455, § 2120(a), redesignated former subsec. (b) as (c). EFFECTIVE DATE OF 1976 AMENDMENT Section 2120(c) of Pub. L. 94-455 provided that: "The amendments made by this section (enacting subsec. (b) of this section and section 362(c)(3) of this title] apply to contributions made after January 31, 1976." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 362 of this title. Page 126 § 118